As the auction process initiated by The Takeover Panel of UK for Corus Group Plc entered the final round, Ratan Tata held his nerve while his Brazilian rival Benjamin Steinburch of steel company CSN blinked.

Tata Steel's offer of 608 pence per share of Corus in the 9th and final round of bidding forced CSN out of the race, catapulting the Indian company to the rank of the fifth-largest global steel maker. Tata Steel is now all set to acquire the second-largest European steel maker after it gets formal approval from the Corus board and subsequently from shareholders.

Tata Steel has spent more than $400 million in recent years to buy Singapore's NatSteel and Thailand's Millennium Steel, and other group companies have also made acquisitions outside India.

The UK's Teley Tea and South Korea's Daewoo are some of the Tata Group's previous global acquisitions.

Corus marks the biggest-ever overseas acquisition by an Indian company and the second largest ever in the global steel business after the Mittal Steel - Arcelor merger last year. Among domestic business groups, Tata group has been in the forefront in overseas acquisitions over the last few years with many notable deals involving some well established brands.

Early media reports had calculated the deal value at $11.3 billion (approximately Rs50,000 crore) based on the issued equity capital of 94,609,059 shares.

However, based on the 1,015,183,283 equity shares of Corus on a fully diluted basis, the equity component of the deal is valued at $12.11 billion (Rs53,526 crore). After considering the debt in Corus books, the enterprise value is nearly $13.6 billion.

The deal values Corus Group at seven times its 2005 EBITDA and 9 times estimated EBITDA for the year 2006. The final offer is 33.6 per cent higher than the initial bid made by Tata Steel and 21.6 per cent higher than its last revised bid announced in December.

The final price is at a premium of 49.2 per cent to the market price of the stock just prior to the announcement by Tata Steel about its interest in Corus and at a premium of 68.7 per cent to the average one-year market price prior to the bid announcement by Tata Steel.

The final offer price from Tata Steel is higher than market and industry expectations. Most analysts were expecting a final price of around 560 pence per share and the Corus stock also hovered around these levels on Monday.

Tata Steel had tied up sufficient financing arrangements, as detailed in the merger scheme document, for its initial bid. Additional funding required would be arranged from additional credit facilities and further cash contribution from Tata Steel to its subsidiary Tata Steel UK, which is the acquiring company.

A statement issued by Deutsche Bank to the London Stock Exchange said financial advisers to Tata Steel - ABN Amro and Deutsche Bank - are satisfied that sufficient resources are available to finance the deal.

All the terms and conditions mentioned in the detailed merger scheme issued earlier by Tata Steel and Corus would be applicable and the merger process would proceed as detailed in that document. Subsequent to approvals by the Corus board and shareholders, the formal offer document from Tata Steel to Corus shareholders is expected to be issued by mid-March. Formal completion of the merger may take another couple of months more.

Tata Steel made its first offer for Corus at 455 pence per share in October 2006. CSN entered the fray nearly a month later and made a conditional offer of 475 pence per share. Tata Steel countered with a 500 pence per share offer in early December, but CSN raised the stakes with a higher offer of 515 pence per share the very next day.

The Corus board approved and recommended both offers to its shareholders and deferred a shareholder meeting to given more time to the bidders and shareholders to arrive at a decision. The Takeover Panel intervened to end the uncertainty and announced an auction to end the stalemate.

Though there was speculation that Tata Steel may hike its offer just before the auction, both bidders entered the closed-door auction process without modifying their earlier publicly announced offers.

Last year Corus was the ninth largest steel producer in the world with 18.2 million tonnes of output. It banked pre-tax profits of £580 million on turnover of £10.14 billion (around Rs88,492 crore), while Tata Group company Tata Steel, was ranked 56th in the list of steelmakers around the world with output of 5.3 million tonnes.

CSN's 603-pence offer is the second time in five years, the last being 18 months ago, that the Brazilian steel maker has been disappoined in its attempt to buy Corus.

In 2002, CSN had held talks with Corus about a tie-up but ended up backing off because of concerns about the target company's financial health.

Steinbruch had again eyed Corus after losing out to Chicago-based steel services group Esmark in a bid for U S steelmaker Wheeling-Pittsburgh Corp.

With Tata Steel's acquisition, analysts and industry observers are cautiously optimistic about the deal. While few doubt the long-term strategic importance of the acquisition to Tata Steel, the financial risks of such a high-priced buy are disconcerting. In line with these sentiments, Tata Steel stock is down close to 7 per cent in early trades today.