Companhia Siderugica Nacional (CSN), the largest steel manufacturer in Brazil, is speculated to be the only likely challenger to Tata Steel with its own counter-bid for Corus Group Plc, going by the latest reports. CSN has appointed investment bank Lazard to advice on a counter-bid, according to British newspaper The Sunday Times.

CSN and Corus had contemplated a merger in 2002 and talks had reached an advanced stage, before they were called off for undisclosed reasons. Both companies know each other very well and strategically, CSN is an equally good fit for Corus as is Tata Steel.

CSN is also a midget, like Tata Steel, by global standards. It has an annual production capacity of 5.8-million tonnes as compared to Tata Steel''s domestic capacity of 5-million tonnes – excluding NatSteel and Millennium Steel in South East Asia.

CSN was a government-owned company till 1993, when it was privatised and was acquired by Benjamin Steinbruch — who is currently its chairman. Shares of CSN are also listed on the New York Stock Exchange, besides Sao Polo.

CSN, which operates an integrated steel plant in Brazil, acquired US-based Heartland Steel in the US in 2001. The company also has a presence in Europe through its ownership of Lusosider in Portugal, which manufactures galvanised products. Interestingly, Lusosider was floated as an equal JV between Corus and CSN, but Corus sold-off its stake to CSN early this year.

CSN employs only about 8,000 people as compared to around 38,000 by Tata Steel. The Brazilian company is one of the lowest cost manufacturers of steel in the world, though its average per tonne cost is higher than Tata Steel''s, despite its much lower employee strength.

The real strength of CSN is its ready access to abundant raw material as Brazil has one of the largest deposits of iron ore in the world. A consortium led by CSN has a nearly 42-per cent stake in Companhia Vale do Rio Doce (CVRD) – the largest global producer and supplier of iron ore and pellets and a major gold miner in Brazil. The CVRD stake was acquired in a privatisation process for over $3 billion. CSN directly holds a 16.3 per cent stake in CVRD.

Meanwhile, German steel company ThyssenKrupp has denied media reports that it was preparing a counter-bid for Corus. A spokesperson for Thyssen has stated that the company is not considering a bid for Corus.

Potential Russian bidders like Severstal and Novolipetsk Steel are now understood to be less keen on a counter-bid, as they are not sure about winning the support of the Corus management, pension funds and employees.

Tata Steel has already tied-up the finances for the deal and is in a position to raise its bid if a counter-bid emerges, which is also discouraging other possible bidders. Severstal — earlier considered to be the most likely challenger to Tata Steel — is busy with preparations for its IPO in London and hence may not want to be distracted by a high-profile acquisition.