Bidding war likely for Corus Steel?

Tata Steel's takeover bid for the much larger Anglo-Dutch Corus is likely to attract predators on the prowl to expand their empires. Rex Mathew reports.

Tata Steel may have to ward off other eager suitors, if it finally decides to make a formal bid to acquire Anglo-Dutch steel maker Corus. Other large steel companies are also interested in Corus and a bidding war is very much possible.

Russian steel company Severstal, which failed in its attempt to merge with Arcelor, is reportedly very keen on acquiring Corus. Alexei Mordashov, Severstal's majority owner, is still smarting under the Arcelor loss to Mittal Steel and would not miss an opportunity to bid for a large European rival like Corus.

Severstal is the largest Russian steel manufacturer with an annual capacity of close to 11.6 million tonnes in Russia alone. The company owns more than 70 per cent of Italian steel maker Lucchini, which has a capacity of 4 million tonnes. Its subsidiary, Severstal North America, had acquired steel assets with an annual capacity of 2.4 million tonnes in the US in 2004.

Aggregate annual steel making capacity of the Severstal group is currently around 18 million tonnes. The group is one of the more profitable steel makers and had reported EBITDA in excess of $3 billion on revenues of $11.5 billion for 2005.

Mordashov, who currently owns 90 per cent of Severstal and is reportedly close to Russian president Putin, had last week announced plans for an IPO for his company in London. This has fuelled speculation that Severstal is building a war chest to finance a possible bid on Corus.