Can CSN trump Tata Steel?

Tata Steel's bid to acquire Corus Group has been challenged by Brazilian rival CSN. What are CSN's chances of success and how far would Tata Steel go in this bidding war?

Finally, Tata Steel has been challenged in its quest to acquire European steel major Corus Group Plc. Nearly a month after reports on Companhia Siderugica Nacional (CSN) as the only other likely bidder for Corus (See: Brazils' CSN the only likely challenger for Tata's Corus bid), the Brazilian steelmaker has announced a rival bid which is higher than the offer from Tata Steel. (See: Brazil's CSN ups Tata offer with $8.1-billion rival bid for Corus)

In fact, advisors to Tata Steel had foreseen this move from CSN and had reportedly advised a joint Tata Steel-Corus hostile bid for CSN. But the Tata Group was not too keen as it would be against the Group's stated policy of not making any hostile acquisitions. (See: Joint Tata - Corus bid for Brazilian steelmaker CSN?)

CSN is offering 475 pence per share of Corus, as against Tata Steel's offer of 455 pence per share. CSN would also match Tata Steel's offer to make upfront cash payment to bridge the shortfall in Corus's pension fund schemes and increase future pension fund contributions to 12 per cent of workers' salary. CSN would finance its bid through internal resources and new credit facilities from Barclays Bank, Goldman Sachs and BNP Paribas.

However, CSN would announce a formal firm bid only after completion of due diligence and on satisfaction of other undisclosed conditions, which CSN may waive at its discretion. CSN chairman Benjamin Steinbruch reportedly met with chairman of Corus yesterday in London and discussed the offer, according to reports in the British media.

Ironically, Tata Group chairman Ratan Tata was meeting the management and reporters of London newspaper The Times to discuss Tata Steel's Corus bid, when the news of CSN's counter-bid was broken to him. The Times said Ratan Tata was 'gentlemanly and courteous' when he learned about the counter-bid and left without disclosing his next moves.