Tatas will have to up its bid: Analysts
Tata Steel Ltd will have to revise its offer upwards to acquire Corus Group Plc after Brazil’s Companhia Siderurgica Nacional (CSN) made a counter offer.
Analysts say that Tata Steel will have to up its bid in order to stay ahead of CSN. Ratan Tata is in touch with top brass of Corus on this issue.
On Friday, CSN had surprised market watchers with an unexpected bid for Corus, quoting 475 pence per share, nearly 20 pence more than the Tatas’ bid.
It is expected that CSN will seek to complete the due diligence and make a formal offer to the Corus board, in time for the Corus EGM on December 4.
Even though the Corus board had strongly recommended the Tata offer to its shareholders last month, sources close to the Tatas said the Corus board now has no option but to fulfil its fiduciary obligation to open its books for a due diligence by CSN, just as it did for Tata Steel.
The Tata top brass is expected back in the country late on Sunday night. Group chairman Ratan Tata — who was in London when the news of the counter-bid trickled in on Friday, B Muthuraman, Tata Steel MD, other senior officials and advisors are expected to meet on Monday in Mumbai to take stock of the situation.
Sources close to the Tata group said that they were waiting for an update from the Corus management. “Right now, there is only one offer on the table, that made by the Tatas. CSN’s so-called bid is actually only a letter, with nothing binding about it,” said a senior official involved in the negotiations from the Tata side.
Ideally, the Tatas would be hoping the Corus board rejects the CSN offer, citing perhaps reasons of cultural incompatibility. In ’02, Corus had to walk away from a take-over bid for CSN, after its share price tanked soon after the offer was made.
However, an outright rejection may be difficult given that some key Corus shareholders like Standard Life, have openly voiced their dissent on the Tata offer, saying it undervalued the company. On Friday, Standard Life officials said they weren’t surprised that another bidder had entered the fray.
As the Corus share price moved up 22.5 pence on Friday to close at 495.5 pence, a number of major shareholders began selling a large quantity of shares, taking advantage of the sharp rally in its share price, according to the data available with London Stock Exchange.
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