Tata Steel ready with Corus bid?

Rex Mathew
17 October 2006

Nearly two weeks have passed since reports first emerged about a possible aggressive bid by Tata Steel for European steel maker Corus. 

Neither side has made any definitive announcements so far, except from a statement from Tata Steel that it is evaluating various opportunities including Corus. Share price of Corus had surged after the first reports came in, but have cooled down as no formal offer has materialised till now.

Most industry analysts now believe that discussions between Tata Steel and Corus have been concluded and the former is ready with a bid, which is expected to be announced this week. The bid amount is likely to be between $8 billion and $9 billion — lower than the earlier speculated $10.5 billion.

There is also speculation that Tata Steel is even ready for a hostile bid, if the Corus management does not recommend the bid to its shareholders. However, indications are that the Corus management is favourably inclined towards a Tata bid and would prefer Tata Steel over other potential suitors like Severstal.

Latest reports in the British media indicate that Tata Steel may also be considering the option of taking a minority stake in Corus, instead of an outright acquisition. If these reports are to be believed, Tata Steel has made an alternative offer for 20 per cent of Corus for around $1.5 billion — if a full buyout does not materialise. Acquisition of a strategic stake by Tata Steel may see the two companies forming a broad business alliance, instead of a merger.

Meanwhile Russian steelmaker Evraz, controlled by billionaire Roman Abramovich, has shied away from a bid for Corus. Senior Evraz officials said valuations are too high for an acquisition bid. Evraz was considered by many analysts to be one of the other contenders to acquire Corus, along with fellow Russian company Severstal and Brazilian steelmaker CSN.