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Tata-CSN war for Corus intensifies

Bidding war between the Indian and Brazilian steelmakers for the Anglo-Dutch firm may be heading towards guillotine auction.

January 5, 2007

Mumbai/London: The Tata-CSN tussle for acquiring Corus is set to shift gears, with revised sweetened bids expected by the middle of January. But the final decision on this protracted war for the Anglo-Dutch steelmaker is likely only by first week of February.

Analysts are expecting revised bids from both Tata Steel as well as Brazilian steelmaker Companhia Sidururgica Nacional.

Even after the revised bids if the issue isn't settled, then the auction suggested by the UK Takeover Panel is likely to come into play.

January 30, 2007, has been set by the UK panel for final bids. If a bidding war scenario exists shortly before this, with none of the players ready to back out, then a "guillotine auction" is likely to settle the issue once for all.

The procedural formalities of the auction process are finalized by the takeover panel after holding talks with both the suitors.

It was initially speculated that the Tatas might be averse to a revised bid which will stretch the valuations of Corus. But the signals from the Tata camp points to another sweetened bid, which is likely to put a price tag of $10.2 billion to Corus. 

The auction process could take two to three days, observers say.

If the Brazilian steelmaker trumps Tatas' expected revised bid, then few see a chance for Tatas to pursue Corus, given their penchant for friendly takeovers, the already stretched valuation of Corus and history of aversion to aggressive bidding.

Also suitors have to bid at a significant premium to the previous bids as per auction norms, which would be detrimental to the financial status of the warring suitors, analysts say. 

The premium is likely to be in the range of 20-25 pence a share. CSN has at present offered 515 pence a share for Corus. The buzz is that the Tatas' final bid would be in the range of 540 pence a share.

Investment banking sources said Tatas went this far as they sense an opportunity to become the world's fifth largest steelmaker if they can add Corus to its kitty. 

But then CSN also follows similar rationale, with a much more aggressive intent. It was Tata Steel who came up with a first offer of 455 pence a share for Corus, which was trumped by CSN, with an indicative bid of 475 pence a share. 

ABN Amro and Deutsche Bank are backing Tata Steel, while CSN's advisors are Goldman Sachs, UBS and Barclays Capital.

The Tatas may also have initially under estimated CSN's firm intentions about Corus. But then, for a prize procession you have to pay a premium. 

Corus had in November reported a 63% surge in net profit for the third quarter, which made compelling case for acquisition for both partners. 

The war for Corus continues behind board room confabulations and the nuances of mustering finances, apart from mind games of corporate honchos - in this case Ratan Tata and Companhia Sidururgica Nacional's Benjamin Steinbruch.


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