Corus stock up on new Tata offer buzz

The Corus stock crossed the 500-pence mark on Monday on the back of expectation that Tata Steel would come out with a revised offer to stave off Brazilian steel-maker Cia Siderurgica Nacional's (CSN's) informal bid for the Anglo-Dutch company.

CSN had, on Friday, announced a last-minute 475-pence-a-share informal offer to fend off Tata Steel's bid to acquire Corus for 455 pence a share.

The share prices of Corus, which had gone up by 4.75 per cent to 495.5 pence on the London Stock Exchange following the CSN move, were up by nearly one per cent to 500.25 pence at the time of going to press on Monday.

The Tata Steel stock lost 2.64 per cent to close at Rs 463.40 on a weak Mumbai market.

Analysts said Tata Steel might revise its bid in tune with the ruling price of the Corus stock, if the situation so demanded.

"The Tata group is unlikely to walk away but will be reluctant to get involved in a hostile bid," they added. Tata Steel executives were not available for comment.

"We believe that a revised bid of 500 pence will be more in line with the strategic premium shareholders probably expected," French brokerage Exane BNP Paribas said in a note.

Exane, the equity brokerage of BNP Paribas, did not attempt to predict CSN's response to a hiked Tata bid. "Beyond that point, it would be up to CSN to evaluate its appetite for risk," it said.

BNP Paribas is one of the financiers of CSN's informal offer to Corus. CSN, alongwith its three financiers, holds nearly a 10 per cent stake in Corus.

Investment bankers said Tata Steel might win the battle by simply matching the CSN offer, if it got support from the Corus board.

"It's difficult for the Corus board to ignore the CSN offer. At the same time, it (Corus) might prefer the Tata Steel offer for three reasons in case both offer the same price. First, CSN made an abortive attempt to acquire Corus four years ago. Second, CSN's offer is subject to due diligence, which Tata Steel had already done. Third, the Corus board had approved the Tata Steel offer," they said.

Meanwhile, CSN's advisor Lazard today began due diligence of Corus and its formal offer will be made immediately after that is complete.

CSN, which owns a 3.8 per cent stake in Corus, is expected to come out with a firm offer before December 4, when the Corus board puts a resolution pertaining to the Tata Steel bid to its shareholders at an extra-ordinary general meeting.

Bankers said the outlook for Tata Steel's balance sheet would be slightly stretched in case it made a higher offer. Calculated at the 455-pence-per-share rate, Tata Steel's debt-equity ratio stands at around 3:1.

Tata Steel UK, which was recently launched by Tata Steel to execute the acquisition of Corus, instructed Herbert Smith for its offer, under corporate partners David Paterson and Malcolm Lombers, with assistance from senior corporate consultant Nimi Patel. Its alliance firm Stibbe is advising it on the Dutch aspects of the deal.

The only edge that CSN's offer had over Tata Steel's, bankers said, was with regard to its Latin American iron ore company Cia Vale do Rio Doce, which could give Corus access to low-cost iron ore and might protect jobs at its units in UK and the Netherlands.