Experts feel Tatas may lose battle for Corus
With reports that the UK Takeover Panel is planning a rare intervention by arranging an auction between the two bidders for the Anglo-Dutch steelmaker Corus Group Plc, the chances of Tata Steel winning the bid have become grim, industry experts said on Monday.
Coming against the background of reports that Tata could have gone all the way up to $12 billion for the bid, a government intervention of this sort would further jeopardize the Indian company’s chances of a win, they said. “Tata will not be in a position to match the bid now, especially since CSN already has a 23% stake in Corus along with its bankers,” said Hitesh Agrawal of Angel Broking.
Last Monday, within hours of Tata Steel sweetening its original bid for Corus to 500 pence per share, Brazil’s CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steel’s offer, thereby further intensifying the takeover battle.
The Indian private steel major will face two major obstacles now. One, that it cannot extend the bid too much, since that would stretch its finances. Two, CSN, with its 23% stake, is better positioned to bid a higher price since it would need to buy only the remaining 77% now. Already, at the time of the initial announcement of the tie-up between Tata Steel and Corus, Tata Steel had said that it will not go ahead with the bid unless it has a minimum acceptance from 75% of Corus shareholders.
“If CSN decides to up its stake by another 2.1 % as it had been doing so in the last one month, the Tatas will be placed at a disadvantage,” Agrawal adds.
Experts are also of the opinion that Tata Steel’s race for Corus will now depend on how desperate the company is to bag the world’s eighth largest steel maker. From a long term perspective, the Corus buy, even at high levels, looks beneficial. However, for someone who looks at the short term, the buy is something that can only put pressure on Tata Steel’s balance sheet, they added.
“The battle over Corus was getting too long drawn out, which could have prompted the authorities to step in,” said a Mumbai-based analyst.
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