News: 'Tata may up Corus offer, but not by much'

(RTR 12/12/2006) Mumbai - Tata Steel Ltd. may raise its bid for Corus Group Plc one more time, but will not be able to top the new offer of 515 pence per share from Brazil's CSN by much, analysts said on Tuesday.

As part of its strategy to avoid a drawn-out battle for the Anglo-Dutch steelmaker, Tata Steel may also directly sell its case to big shareholders such as Standard Life Investments, which owns 7.8 percent of Corus, they said.

The Tata group, which controls India's biggest private steel firm, Tata Steel, as well as its top software firm Tata Consultancy Services and top bus and truck maker Tata Motors aims to significantly expand it overseas operations, which already account for 30 percent of its revenue.

A source close to the Tata group said the group saw its bid for Corus as a strategic move, but the group was also ready to pursue other options.

"It is very clearly a good strategic move for the Tatas. If it doesn't happen, then they will move on. There are always other opportunities," he said.

The spokesman for Tata Steel declined comment.

Companhia Siderurgica Nacional (CSN) , which failed to strike a deal with Corus in 2002, on Monday offered to buy Corus for 4.9 billion pounds ($9.6 billion), or 515 pence a share, 3 percent higher than Tata Steel's raised offer of 500 pence a share.

Analyst estimates of the final bid by the Tatas varied from 520 to 540 pence a share, or 1 percent to 5 percent more than CSN, although local media reports said bankers were ready to fund the deal for 550 pence a share.

"I think the breakeven point is 540 pence a share," said Rakesh Arora, analyst at Macquarie Research.

Bhavin Chheda, head of research at Pioneer Intermediaries, said the Tatas may not go that far.

"I see it somewhere in the 520-525 pence range."

Analysts said an aggressive bid by the Tatas may hurt the company's shares, which have already fallen more than 13 percent since Oct 20, when Corus approved its initial offer of 455 pence.

Some analysts say Tata Steel may withdraw from the race.

"We feel that Tata Steel might not outbid CSN as it will stretch their balance sheet considerably and it might take a lot of time before synergies between Tata Steel and Corus materialise," Emkay Research said in a note.

Sumeet Rohra, an analyst with Antique Stock Broking Ltd. said: "It may be a good move for Tatas in the long run but the way global commodities cycle is going, the market is not ready to take a long-term view on the stock."