Some 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.

In 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.

More 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.

Last 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.

It 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.

However, 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.

Tata 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 plans.

The 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.

Knowing 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.

Tata 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.