Tata Steel to devise Corus strategy today

The Tata Steel board, which meets in Mumbai tomorrow, is expected to discuss a counter bid in case of Brazil's Cia Siderurgica Nacional (CSN) making a firm offer for Anglo-Dutch steel company Corus Group. It will also explore the opportunities for raising additional funds, if required.

However, India's largest private sector steel-maker may stop short of a protracted price war for the fear of hurting its shareholders' interests.

On Friday, when CSN announced its intention to offer 475 pence a share for Corus, 20 pence more than Tata, Tata Steel's stock fell 2.64 per cent amid fears that it may end up overpaying for Corus in a price war.

In any case, point out investment bankers, the Tata legacy can be relied upon to not cross reasonable limits and indulge in a long-drawn takeover battle involving bids and counterbids.

As a case in point, when Tata Chemicals offered to pay $305 a share for Egyptian Fertilizers Company nearly one and a half years ago and Egypt Kuwait Holding made a rival bid of $350 a share, the Tatas made just one counter-bid, of $352 a share, and withdrew when this was upped.

Tata Steel executives were not available for comment. Meanwhile, the European Commission has set a provisional deadline of January 3 to consider approval of the Tata-Corus deal on grounds of competition.

CSN began due diligence for its Corus bid yesterday. It is expected to come out with a firm offer towards late next week.

Some investment bankers felt Tata Steel would win Corus by simply matching the CSN offer. In that case, Tata Steel would have to fork out an additional $300 million (nearly Rs 1,350 crore) "" the difference between CSN's $8.4 billion and Tata Steel's $8.1 billion bids.

Other bankers said Tata Steel would sweeten its offer by 15 per cent to 550 pence a share, if required. "It will be the maximum limit. Tata Steel should not go beyond this level," they added.

Tata Steel has had initial discussions with its bankers for mobilisation of additional funds, if needed. It had lined up a loan of $6 billion from ABN Amro, Deutsche Bank, and Standard Chartered Plc.