The Tata Group and CSN have entered the shoot-out zone, trumping each other's bids within hours, reports Rex Mathew.
Companhia Siderugica Nacional (CSN), Tata Steel's Brazilian competitor in the all-out bidding war to acquire European steel company Corus Group Plc, has taken, what was meant to be a knock-out punch from Tata Steel, lightly, delivering a counter-jab which could be fatal to Tata Steel's hopes of acquiring Corus. CSN has unveiled a firm counter-offer for Corus at 515 pence per share, valuing Corus at $9.6 billion – excluding debt, against Tata Steel's revised offer of 500 pence per share, announced earlier today.
To win over the pension fund trustees of Corus, CSN has offered a slightly higher amount than Tata Steel, in order to bridge the deficit in pension funds, and has also agreed to match Tata's offer of increasing future contributions to 12 per cent from 10 per cent. It is not clear if the trustees are supporting the offer from CSN.
Details of the financing arrangements made by CSN have also not been announced. There were reports that a consortium including Goldman Sachs, UBS and Citigroup was finalising a $9 billion facility for CSN to complete the acquisition.
The Corus board is expected to meet soon to consider the CSN offer. The board last met yesterday, when it considered, approved and recommended the revised Tata Steel offer at 500 pence per share. It is not clear if CSN's bid would have the backing of Corus management and board. There are reports that Corus CEO Philippe Varin would retain his position but chairman James Leng would step down, if CSN were successful. Tata Steel had declared that the present Corus management would continue for at least 2 years, if its bid is successful, and senior Corus executives would also be appointed to the Tata Steel board.
"This offer is both higher than the initial proposal by CSN as well as the revised Tata offer of 500p a share. It is also consistent with our strategic objective of securing access to raw materials, low-cost production and growth markets. The combination of the two businesses will create a strong platform from which to compete and grow in an increasingly global market", Corus chairman Jim Leng was quoted as saying in a BBC report.
"The strategic impetus for this combination is growth - growth in Brazil, in Europe and for our combined workforces. Our goal is to unlock the value of our iron ore assets through Corus, transforming them into cost-effective, high-quality steel products using Corus' advanced engineering capabilities and its excellent European distribution platform. This is a winning combination for all stakeholders", CSN chairman Benjamin Steinbruch was quoted in the same report.
Early today, Tata Steel had said that it was hiking its acquisition offer from 455 pence, per share of Corus Group, to 500 pence per share. This effectively trumped CSN's offer last month of 475 pence per share. The board of directors of Corus, after getting advice from Credit Suisse, JP Morgan and HSBC, had recommended the revised Tata offer to its shareholders. The company directors have also undertaken to vote in favour of the acquisition by Tata Steel at the shareholders' meeting to be called later, in respect of their personal holdings representing 0.1 per cent of the share capital.
Reports suggested that Standard Chartered Bank and Standard Chartered First Bank of Korea had extended additional funding for the higher offer to Tata Steel and its associate company Tata Steel Asia Holdings.
Most analysts and industry observers now expect Tata Steel to back out of the bidding war, if CSN's offer receives backing from the Corus board, as it would be too expensive and highly risky to announce an even higher bid. Tata Steel would receive around $92 million as inducement fee, if the Corus board decides to back the CSN bid.
also see : Tata Steel ups the ante;
hikes Corus offer to $9.17 billion