of the large institutional shareholders of Corus are unhappy
with Tata Steel''s offer price of 455 pence per share.
They feel that the price is too low considering the premium
product range, established position mature markets and
technological capabilities of Corus.
a letter to Financial Times, British heavy equipment
maker JCB''s chairman has stated that the offer price is
"too low". He said he is "saddened and
disappointed that Corus is failing to lead the consolidation
of the global steel industry and instead appears eager
to rush into the hands of Tata, a significantly smaller
steelmaker than itself". JCB, well known for its
earth moving equipment, holds a 2-per cent stake in Corus
and is also a major customer.
significantly, for the first time since the deal was announced,
a key corporate figure has objected to the deal on nationalistic
and protectionist grounds. JCB chairman said "British
manufacturing would lose out" and "Europe will
hand over a valuable manufacturing asset", if the
deal is allowed to go through. He went on to say that
Corus should have used its position in Europe to acquire
smaller steel companies in emerging markets like India
and Brazil, instead of allowing itself to be acquired
by a much smaller company.
week, Corus''s single-largest shareholder Standard Life
Investments had also termed the offer price as too low
without specifying whether it would accept the offer.
Standard Life, which holds nearly 8 per cent of Corus,
said the offer from Tata Steel was "lower than we
would have expected the board of Corus to agree to".
Standard Life would gain more than $185 million from its
investments in Corus, even at the current offer price.
is as yet unclear if these institutional and corporate
shareholders would hold out and demand a better offer
from Tata Steel. If they hold out, some of the retail
investors may also be encouraged to hold on to their shares
on expectations of a better offer. In such a scenario,
Tata Steel may find it difficult to acquire 75 per cent
of Corus the minimum acceptance level specified
by Tata Steel for the deal to go through.
most analysts and industry observers believe that Tata
Steel has the upper hand as it already has the support
of the Corus management and pension funds. Institutional
and corporate investors of Corus would have to eventually
accept the offer, despite the initial displeasure over
low valuations, according to these observers.
Steel has already tied up the required finances and so
far no challenger has emerged with a counter-bid. Brazilian
company CSN is rumoured to have failed in its attempt
to raise sufficient finances. Unlike Tata Steel, which
has the backing of the asset-rich Tata group, CSN does
not have sufficient assets to back large-scale debt raising
support of pension funds is very critical for any acquisition
to go through in the UK, as they can veto the deal if
future pension payments are not assured. The pension liabilities
of Corus are believed to be a staggering $24 billion
more than double its total enterprise value.
this, Tata Steel had initiated discussions with two major
Corus pension funds before the deal was announced. To
please pension funds and workers, Tata Steel has offered
to make an upfront cash payment of $237 million to bridge
the current deficit or shortfall in Corus'' pension funds.
It has also agreed to increase future pension contributions
to 12 per cent from the current 10 per cent.
Steel has also held promised not to cut jobs in any of
the Corus units in the short-term and current employment
terms would be protected. The Tatas have also tried their
best to accommodate the present Corus senior management,
who would retain its positions
for at least the next two years. Key directors of Corus,
including its chairman and CEO, have been offered positions
on the board of Tata Steel after the acquisition.