Corus board likely to recommend Tata offer today: WSJ

The board of directors of Corus Group Plc would meet later today to discuss the offer by Tata Steel to acquire the whole of Corus at 455 pence per share, according to the Wall Street Journal. Corus had yesterday confirmed that it has received an initial non-binding offer from Tata Steel.

The report suggests that the Corus board is favourably inclined towards the bid from Tata Steel and is likely to recommend the offer to shareholders. Annual cost savings of around $350 million is likely from the merger of Corus and Tata Steel, said the report.

The report further states that Tata Steel has already completed the due diligence on Corus. The ready willingness of the Corus management to open the company's books for Tata Steel is seen as an indication of its interest in the offer.

However, analysts and industry observers continue to believe that the offer is unlikely to go through at the current offer price of 455 pence per share, which was at a 5.2-per cent discount to its Tuesday's closing on the London Stock Exchange (LSE). They reckon that Tata Steel has made a preliminary offer to gauge the response from other potential bidders and would be willing to raise the offer if any counter-bid materialises.

Even if there is no counter-bid, the Corus board may nudge Tata Steel to raise the offer to make it more acceptable to shareholders. Corus shares closed at 479 pence on the LSE yesterday. The stock touched a high of 500 pence in early trades before giving up most of its gains on the news of the offer price by the Tatas.

Meanwhile, another Russian steel company - Novolipetsk Steel - is also rumoured to be interested in Corus. Novolipetsk is one of the largest Russian steel manufacturers with an output of 8.5-million tonnes last year. Among other Russian steel companies, Severstal, still smarting at its bid for Arcelor being rejected in favour of Mittal Steel  is reportedly interested in Corus while Evraz has indicated that it is not interested in the Aglo Dutch company because of its of high valuations.