As announced, the takeover battle between Tata Steel and Brazilian steelmaker CSN for Corus Group plc has entered the auction stage. The UK's takeover regulator has announced the auction meant to settle the competition to avquire Corus by the end of this month. The auction process will start on Tuesday, 30 January, and is expected to be completed by the next day.
There would be eight rounds of bidding in the first stage, in which both bidders have the option to submit fixed price cash bids. In the first round, both bidders can submit bids that are higher than their publicly announced bids. Bidding would proceed to subsequent rounds only if the bidder with the lower offer at the end of a round is willing to make a higher offer.
In each round, the bidder who made the lower offer in the previous round has to raise the bid by at least 5 pence per share. However, this condition of minimum increment is not applicable for the bidder who made the higher offer in the previous round.
If the auction is inconclusive after eight rounds, the bidders have the option to offer a fixed cash price in the final round or a specified amount over and above the rival bid. The auction would be conducted behind closed doors and the bidders are not allowed to make their offers public during the entire auction process. The bidders are also not allowed to announce any alternative offers - like a cash and stock offer – unless a third bidder enters the fray.
The detailed auction procedure as set out in the statement by The Takeover Panel, UK (www.thetakeoverpanel.org.uk), is as follows:
"The auction procedure will consist of a maximum of nine rounds, comprising up to eight rounds in which each offeror is able to lodge a fixed price bid in cash followed by, if the auction procedure has not by then concluded, a final round. In the final round each offeror is able to lodge either a fixed price bid in cash or a cash bid calculated by reference to a formula pursuant to which an offeror can lodge a bid at a specified amount in cash more than the other offeror subject to a specified maximum cash amount.
"In respect of the first eight rounds of the auction procedure, a subsequent round will only take place if the offeror which has the lower cash bid as at the beginning of that round (or, if at that time the highest cash bids of both offerors are at the same price, either offeror) lodges an increased cash bid in that round.
"Such a cash bid must be not less than 5p higher than the higher cash bid as at the beginning of that round (or, if at that time the highest cash bids of both offerors are at the same price in cash, not less than 5p above the price of those bids). However, if an offeror which has the higher cash bid as at the beginning of a round lodges an increased bid in that round, it is not subject to any minimum increment.
"It is expected that the increased bids (if any) lodged during the auction procedure will not be publicly announced by any of the parties other than as set out below.
"Assuming, as is currently expected, that the auction procedure has completed by 2.30 am (London time) on 31 January, the Panel Executive expects to make an announcement by no later than 3.00 am (London time) on 31 January setting out the prices of the offers to be announced by each offeror following the conclusion of the auction procedure.
"If the auction procedure is not completed by 2.30 am (London time) on 31 January, the Panel Executive would expect to freeze the auction procedure at that time and to announce by 3.00 am (London time) on 31 January the prices of the highest cash bids (if any) lodged by each offeror at that point. In those circumstances, it is expected that the auction procedure would then be re-commenced no earlier than 4.30 pm (London time) on 31 January and a further announcement would be made by the Panel Executive by no later than 3.00am (London time) on 1 February.
"Following the Panel Executive's announcement of the result of the auction procedure, each of the offerors is required to make an appropriate announcement under Rule 2.5 of the Code of a revised offer in respect of its latest bid lodged in accordance with the auction procedure.
"For the avoidance of doubt, the auction procedure may complete in circumstances where the revised offers which the offerors are required to announce under Rule 2.5 of the Code are at the same prices in cash.
"Between 4.30 pm (London time) on 30 January and the time when an offeror's appropriate offer announcement under Rule 2.5 of the Code has been released by a Regulatory Information Service, neither that offeror nor any person acting in concert with it may deal in relevant securities of Corus or take any steps to procure, amend or renew any irrevocable commitment or letter of intent in relation to its or the other offeror's offer.
"The Panel Executive reserves the discretion to amend the auction procedure as appropriate. In particular, the times referred to above are subject to change, depending on the circumstances at the time.
"Following the conclusion of the auction procedure, neither offeror is permitted to revise the price of its offer for Corus from that established by means of the auction procedure, or to introduce any new alternative offer (unless, under the normal provisions of the Code, a third party announces a firm intention to make an offer for Corus).
"Each of the parties has agreed to the terms of the auction procedure and this announcement".