News: Tatas a step closer to Corus

(TT 07/10/2006) Calcutta - Tata Steel has taken the first formal step to table an offer to pick up a stake in Anglo-Dutch steel firm Corus Group plc by filing a notice with the London Stock Exchange.

Tata Steel’s communication to LSE went out on Thursday night. Corus Steel followed it up with a similar filing confirming that an offer was on its way.

Both companies were complying with Rule 2.10 of the City Code on Takeovers and Mergers and disclosed the number of outstanding shares of Corus that were being targeted by the offer.

The announcement is made to signal the start of the offer period.

Under the code, an offer period indicates that either an offer has been made or it is on its way.

When contacted, a Corus Group plc spokesperson refused to confirm whether the Tatas or other suitors had placed their offers on the table.

Rule 2.10 does not set a specific timeframe within which a firm offer has to be made. However, market sources said the offer would be made fairly soon with some speculating that it would come over the weekend.

The formal start of the offer period will immediately place a set of restrictions on Corus.

An LSE official said the target company, in this case the Corus group, would not be able to take sweeping decisions in the running of the company.

For any major decision, the company has to seek shareholders’ approval, the official added.

Although Rule 2.10 does not spell out a time period for stumping up an offer, the target company can approach the Takeover Panel to ask for the imposition of a time limit on the potential offeror.

If Corus chooses to do so, Tata Steel has to come up with an offer within that stipulated timeframe under Code 2.4, popularly known as ‘put up or shut up’ clause.

Meanwhile, Corus shares continued their good run on the LSE, hitting a year-high 490 pence during intraday trade.

Although there has been speculation that there are other suitors in the fray, the latest announcement under Rule 2.10 pertains only to Tata Steel’s statement indicating that Corus is expecting only an offer from the Indian company.

Going by Corus’ long-term strategy shared with investors and shareholders recently, the company is keen on low-cost steel manufacture. If a merger between Tata Steel and Corus takes place, Corus will achieve this target as the Indian company is one of the lowest-cost producers of steel in the world. Tata Steel will get access to cutting edge technology and finishing mills in developed markets.