UK Takeover Panel mulls two way auction for Corus
The end to the battle for Corus is coming into sight. The takeover panel of the UK is likely to set a deadline for both bidders – Tatas and CSN – to make their final offers and end the uncertainty looming over Corus’ future. After the Corus board postponed its shareholder meeting indefinitely, without setting a date for the next one, and the Tatas maintained their stoic silence about further intentions, there is no clear timetable for everyone to put their cards on the Corus table. The takeover panel, once it sets a deadline, can ask the bidders to put up or shut up, that is, either make a bid or withdraw.
Speaking to ET, the spokesperson for UK’s Takeover Panel, clarified that in the case of two bidders, both under the scheme of arrangement, the panel can seek to apply an accelerated timeframe to achieve closure.
It may even choose to look at a two-way auction in which case the terms and conditions under which both CSN and Tata making offers would be announced in due course. The rule is designed to stop a target company from being subject to a long-drawn siege, to the detriment of its business and shareholders. Tata’s last bid for 4GBP 4.7 bn was submitted on 10 th December, and CSN’s for GBP 4.9bn on 11 th December. CSN’s pre-conditional bid is valid till July ’07.
CSN’s spokesperson said that CSN would welcome any move that would speed up the process. Persons close to Corus said that any move to achieve some closure would be welcome, as long term uncertainty is not good for the company or its shareholders. Neither the Tatas, CSN or Corus would comment on what stance they will be taking at the moment. The Takeover panel also declined to comment on the state, if any, of its discussions with the parties concerned, or any actions it will take.
According to the rules of the UK takeover code, takeover offers are valid for 60 days. In the case of a competitive situation, bidders can, revise their offers till Day 46, or 14 days before the end of the offer. In a conventional takeover bid, the time table is set by the competitor, in this case CSN.
Looking at the calendar – the key dates therefore look to be 12 th of January and 13 th of January respectively for Tatas and CSN, till when they can revise bids. However, they can, in consultation with the Takeover panel, set an extended deadline provided everyone agrees.
However as both the competing bids are through a scheme of arrangement, where the time-table is set by the court, the takeover panel said that "we will have to decide on what Day 46 is, in consultation with all parties." In a scheme of arrangement system, the Court sets the time-table for completion and implementation.
In Corus, the situation is now like this. Corus has one highest bid on the table, which is CSN’s and which the board has recommended to its shareholders. However, the Tatas have not withdrawn their bid, or made a revised offer, so the Corus is faced with two competing bids under the scheme of arrangement.
And here’s what happens next. Under a scheme of arrangement only one bid can go before the court, and an auction is an alternative method for ensuring that both bidders can stay in the race. Once the final date for all revised offers has been agreed to by all parties, in case there continues to be two offers, the final date can be accompanies by a two-way auction. The takeover panel, in consultation with the parties, will set out a framework for the functioning of the auction. The winner of the auction can then proceed with the takeover either under a scheme of arrangement, or a conventional offer. The auction rules would specify what the terms and conditions of implementing the takeover would be. While CSN’s current bid is pre-conditional on the Tata offer being withdrawn or rejected, that is a function of the scheme of arrangement requirements, and would not be a deterrent to CSN’s agreeing to an auction.
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