CSN gears for Corus, but trustees are key Tatas
The CSN bid is likely to be announced on Monday if the reported negotiations proceed well, reports Vijay Dutt.india Updated: Dec 10, 2006 20:52 IST
A multi-million pound war for Anglo-Dutch steel maker Corus Group plc is expected following reports that the Brazilian steel maker CSN (Companiha Siderurgica Nacional) is putting the finishing touches to a £4.5 million bid to throw a spanner into Tata Steel's agreed £4 billion deal. The CSN bid is likely to be announced on Monday if the reported negotiations proceed well, industry officials say.
However, a Corus insider was reluctant to say anything except "no comments at the moment" when asked by Hindustan Times if the Corus Board was holding a meeting on Sunday and whether CSN was ready to announce its bid on Monday.
But it was clear from the talk with the Corus insider that "something" would happen in the next few days.
CSN sources have hinted that their offer would be pitched at 475p a share, which will put the value of Corus at £5.1 billion, once debt is included. The Tata's offer is 455p. On Friday shares in Corus closed at 500p, above both offers.
Tata Steel have had the advantage, so far, of having secured the recommendation of the Corus board. But then it is also true the shareholders' vote on the deal last week was delayed until December 20, apparently to give CSN more time.
The city was abuzz with the speculation that the Corus board could withdraw its earlier recommendation for the Tata bid if a higher offer came from the Brazilians. The snag, however, is that no go-ahead is possible without the support of Corus's pension trustees.
Until now, the Tatas have had the support of the trustees of the two main Corus schemes, which have assets and future liabilities worth substantially more than the value of the company. This was affirmed by a source who said the size of the pension scheme (with liabilities of £13 billion and 167,000 members) meant the trustees had the power to scupper the deal by refusing to recommend it to the UK pension regulator.
Tata Steel agreed not only to make up the estimated £126 million deficit in Corus' smaller scheme but also to increase the company's rate of contributions to the larger scheme for three years.
HT learnt that CSN has now been negotiating with the trustees for the past 10 days and that the trustees have put up some terms to be met before they can accept any recommendation from the Corus Board. CSN's discussions with the trustees are believed to be focusing on the amount of debt that CSN is taking on to fund the deal, and whether it will be able to make up the deficit if things go wrong in the future.
Another report is that the Corus board would be willing to consider the CSN offer if it was an unconditional one. It is also possible that the board could consider the CSN offer even without the agreement from the trustees if the bid was for a higher sum, city sources said.
Whether the Tatas would come out with a renewed bid is also under speculation. A Corus source said that a few days ago, the Tatas had said they could renew their offer. Ratan Tata is opposed to getting involved in contest bids, but in this case the company has put in a lot of time effort.
Some also felt that a tie-up between the two companies, Tata and CSN, would make sense. CSN would be able to import high-quality, low-cost iron ore from Brazil to be processed at Corus plants. Their combination would create a top-five global steel group with 24 million tonnes of annual steel production.
But these are speculative ideas. For the moment, the Tatas have a battle on their hands.