Tata Steel, CSN braced for Corus auction

Rex Mathew
29 January 2007

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.