Auction may not be last word on Corus

Board has right to reject takeover panel's choice.

Though the UK Takeover Panel is set to recommend the winner by tomorrow, the battle for steelmaker Corus may not end soon given that the company's board reserved the final right on the panel's choice.

A source close to the panel, the monitoring authority for mergers and acquisitions in UK, said the auction was aimed at protecting shareholders' interest and speeding up the process. When contacted, a Corus spokesperson said, "The board will act in the best interests of shareholders."

Britain's takeover regulator started the auction process at 10 p.m. (London time 4.30 p.m), and it is expected to continue till 3 a.m. on Wednesday. Both companies have been asked to send bids through email or fax by 2.30 a.m.

Tata Steel had put in its bid first, it was learnt, as CSN's 515-pence-a-share offer was higher on the table.

Tata Steel bid from the offices of its lawyers Herbert Smith in London, while CSN was bidding from its adviser Lazard's office. Arun Gandhi, head of M&A at Tata Sons, is representing the Tatas. It was learnt that Herbert Smith's London office had been video-linked to the Tata headquarters in Mumbai.

The takeover panel will recommend the winner to the Corus board, which will place the name of the winner and the proposed terms and conditions of the acquisition before its shareholders.

The loser in the bidding war would not be allowed to re-bid for the company in the next one year, said a source close to the panel.

A banker close to the development said the panel's recommendation might be indirectly binding on the Corus board, especially if there was a clear winner. Other issues may arise if the bid amounts do not differ significantly.

"For example, contribution to provident fund could be one such issue, in which case the Corus board may differ with the takeover panel," he said.

CSN has agreed to buy Corus for 515 pence per share, topping two offers from Tata Steel,.

If the auction goes through the nine rounds, the minimum winning bid, based on the CSN bid of 515 pence and going by the panel's rule of a minimim revision of 5 pence every round, will be 560 pence a share.

Corus's share price has been hovering at this level. The stock closed at 561 pence yesterday.

Tata Steel shares rose 2 per cent yesterday, indicating that the stock market is happy with the company's conduct in the ongoing negotiations "� whatever the outcome.

The winner of the battle will become the world's fifth-largest steel maker. If Tata wins, it would be the biggest overseas acquisition by an Indian company.

CSN's capacity to ship cheap iron ore to Corus was recently challenged by another Brazilian miner, CVRD.

Meanwhile, CSN today said it had expressed an interest in bidding for Colombian steel company Acerias Paz del Rio SA. A CSN spokeswoman confirmed to agencies that the company had notified Colombian regulators that it might participate in the Paz del Rio auction.

Paz del Rio could offer CSN a fallback plan in case the company fails to acquire Corus.