News: Tatas, CSN said to differ on final Corus auction rules

(DNA 26/01/2007) Mumbai - The UK Takeover Panel is in final consultations with Tata Steel and Brazilian steelmaker Cia Siderurgica Nacional (CSN) before announcing its final rules for an auction of Corus Group.

The highest bid now stands in the name of CSN at 515 pence a share, and the Takeover Panel has set January 30 as the deadline for the takeover process to end.

A Dow Jones report, quoting sources, said that there were differences between the Tatas and CSN on how the bid should proceed, but observers expect a final decision from the Takeover Panel very soon, perhaps as early as Friday.

One possibility could be to invite sealed bids, with the highest bidder getting to keep the UK steelmaker.

"The Tatas are probably keeping any further increases in their offer (they last bid at 500 pence) till the last minute and waiting for the auction procedure to be published," Roy Montague-Jones, solicitor with Reed Smith Richards Butler LLP, told DNA Money.

Explaining the likely procedure based on previous experience, he said the Takeover Panel usually sets a very tight timetable and keeps control over how much time each company has to send in fresh offers.

It may also indicate the minimum on what that offer can be to prevent "an unholy scramble".

He did not rule out a sealed bid auction in which both Tata and CSN would be asked to give their best offers in a sealed envelope with the highest bid winning the company. "We have not had a situation where the Takeover Panel announces a sealed bid so far, but it is an option," said Montague-Jones, who has worked on similar mergers and acquisitions in the past.

• Industrial powerhouses of India: View Slideshow

A CNBC-TV 18 report quotes Arcelor Mittal CFO Aditya Mittal as saying that January 29 will be a very important date. "That's where the panel comes in and all the bits are pieced together. There will be eight open rounds of bidding and the last round is the final round. Whoever has the highest bid in the ninth round is the winner."

Steel industry analysts are sure that Tata Steel will do its very best to acquire Corus, the world's eighth largest steelmaker, which would enhance their production. "Tata has a goal to increase production and has plans to expand. So I can't see why they wouldn't want to enter Europe," says Ioannis Kallinikos, metal analyst with Metal Bulletin Research. "Both Tata and CSN have synergies, and there are pros and cons for both in taking over Corus, but what will finally be important is who is prepared to pay the higher price," Kallinikos told DNA.

A Financial Times report says that a recent legal dispute over CSN's right to iron-ore supply, which is important to the merged business, could blow their attempts to buy Corus off course, leaving Tata Steel with a clear field. The Financial Times report quoted Brazilian ore producer Cia Vale do Rio Doce as saying that under a 2001 accord with CSN it has the right to any extra supplies from the

Casa de Pedra mine in Brazil. That would undermine CSN's plan to supply iron ore to Corus' mills in Europe after a takeover, the newspaper said.

But CSN denied this. "Should CSN acquire Corus, it will exercise its rights to supply iron ore from its Casa de Pedra mine to all its operations, including those in Europe,'' CSN said in an e-mailed statement. "There is no basis for this story. There is no change to our position or our commitment to acquire Corus.''