Independent directors back Tata bid

VINAUSTEEL BID

Tata Steel appears to have got the support of independent directors of Vietnam Industrial Investments (VII), the parent of Vinausteel and SSE Steel, in the bidding war for these two companies with the rival suitor.

The independent directors have recommended shareholders' vote for NatSteel's (a subsidiary of Tata Steel) sale and purchase agreement and not that of its rival suitor, Prudential Vietnam Securities Investment Fund Management Company. Interestingly, Tata Steel's offer is lower than Prudential's.

The resolution will now be put to vote on June 29 at the annual meeting of VII, after having been adjourned twice.

The independent directors feel that shareholders' approval may mitigate any claim that NatSteel may have against VII, arising due to any breach of the sale and purchase agreement, which VII has denied.

A vote against NatSteel's agreement would mean that shareholders could consider VII's offer. The main advantages in Prudential's offer is that it would provide cash directly to shareholders and the offer price is at a significant premium to VII's historic trading prices.

This is for the second time that Tata Steel is getting into a takeover battle. It acquired Anglo Dutch steel company Corus Group after beating rival suitor CSN of Brazil, through an auction.

Bankers close to the development said, VII's lawyers had received an unsolicited offer from Clayton Utz, on behalf of Prudential, which stated that the fund management company and VII's managing director, Henry Lam Van Hung, who holds 10.46 per cent stake, intended for an off-market cash takeover.

NatSteel announced in March that it would acquire 100 per cent interest in SSE Steel and 70 per cent in Vinausteel. The transaction was to be completed by June.

The impasse began with Prudential launching an unsolicited offer of $13.3 million, 10.65 per cent higher than NatSteel's in May.

SSE Steel has a capacity of 250,000 tonnes of bar and wire rods and Vinausteel produces 180,000 tonnes of reinforcing bars.