Wait & watch option for Tatas on Corus

The Tata group will be forced to play a wait-and-watch game as rival Brazilian steel firm CSN shortly begins its due diligence on Corus, the Anglo-Dutch steel giant.

The market was surprised with the announcement of CSN (Cia Siderurgica Nacional’s) regarding its bid for Corus at 475 pence per share. This offer is 20 pence more than Tatas’ bid. CSN is a Brazilian company and it had earlier made an unsuccessful attempt to acquire Corus in 2002.

CSN has just given a letter with nothing binding about it. But Corus has no other option but to but they have to fulfill the fiduciary obligations to open its books for a due diligence by CSN, just as it did for Tata Steel. It has to be noted that Corus board had strongly recommended Tata offer to its shareholders. Corus shareholders like Standard Life, have openly said that Tata has undervalued the Corus.

At the beginning of this year Corus share was trading at 300 pence at LSE (London Stock Exchange). After the CSN offer its share price has reached to 500 pence. This is a good time for Corus shareholder. At 500 pence a share the Corus will cost $9.2 billion
which could become too costly for Tata Steel.

Analyst feels that Tata Steel may get Corus by matching the CSN offer price. There are three reasons for that. First, CSN had an unsuccessful attempt to acquire Corus four years back. Second, the offer is subject to due diligence which the Tata Steel had already done. Third, the Corus board has already approved the Tata offer. But Tata Steel has to gain the confidence of the shareholders of Corus so that it can win the battle to acquire Corus.

Source: Business Standard, Economic Times