Corus'' large shareholders dilute stake as challenge to Tata bid recedes

Rex Mathew
09 November 2006

Rumours and speculation about likely counter-bids for Corus Group Plc have died down in recent weeks as it appears increasingly unlikely that another steel company would come up to challenge Tata Steel. Russian company Severstal and German steel giant ThyssenKrupp have already ruled out any interest in bidding for Corus while Brazilian company CSN and another potential Russian suitor Novolipetsk have not made any moves so far.

Corus Group has reportedly sent the formal offer from Tata Steel and details of the scheme of arrangement signed between Tata Steel and Corus to shareholders. Corus is expected to hold an extraordinary general meeting of its shareholders in the first week of December to discuss the Tata Steel offer.

Though it is still possible that another bidder can emerge over the next three or four weeks, most analysts fell that it is very unlikely. Corus management is seen as being supportive of the Tata bid and workers of various Corus plants across Europe are also less apprehensive about the acquisition bid now. Tata Steel has already won over the Corus pension funds and both British and Dutch governments seem to favour the deal. In any case, they are reportedly keener on the Tata Steel bid than an acquisition by a Russian or Brazilian company.

Corus share price has also declined from the highs it touched before the Tata Steel bid was announced. Even after the formal bid announcement, the stock price had remained higher than Tata''s offer price in anticipation of a counter-bid. As such expectations have faded, the price has also declined closer to the offer price. Corus shares closed at 467.25 pence on the LSE yesterday, as against the offer price of 455 pence.

There are also reports that some of the large institutional investors have sold off their holdings in Corus in recent weeks, which clearly shows that these large investors also consider the possibility of a counter-bid very low. Barclays, the second largest shareholder of Corus, has brought down its stake to below 5 per cent from nearly 6.5 per cent. Alliance Bernstein has reduced its stake substantially to less than a per cent from over 5 per cent. Other large investors who have sold part of their holdings include Jupiter Asset Management and TT International.

Standard Life, the largest Corus shareholder with a nearly 8 per cent stake, has so far not given any indication of its future course of action. Standard Life had stated that it is not happy with the current offer price from Tata Steel. Some analysts believe that Standard Life is still hopeful of a counter-bid or a revised offer from Tata Steel.