×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

CSN, Tata bids for Corus to surpass $10.2 bn

CSN, Tata bids for Corus to surpass $10.2 bn
Comment E-mail Print Share
First Published: Tue, Jan 30 2007. 02 25 PM IST
Updated: Tue, Jan 30 2007. 02 25 PM IST
By Bloomberg Cia. Siderurgica Nacional SA and Tata Steel Ltd. plan to bid at an auction today for Corus Group Plc, the U.K.’s biggest steelmaker, in a contest that may lead to a sale for at least 5.2 billion pounds ($10.2 billion). The U.K. Takeover Panel ruled last week that Corus should sell itself to the highest bidder after three months of competing proposals failed to produce a winner. Rio de Janeiro-based CSN last month raised its bid to 4.9 billion pounds ($9.6 billion), or 515 pence a share, topping a 500 pence-per-share approach from Mumbai-based Tata. Corus stock closed at 560 pence in London yesterday. “It’s going to come down to who is more willing to overpay,” said Stephen Pope, head of equity research at Cantor Fitzgerald LP in London. Corus, the former British Steel Plc, has become a prize as steel prices rise and makers try to cut costs. Tata Steel Chairman Ratan Tata wants to add finishing mills in Europe that supply carmakers such as Ford Motor Co. to plants in India. CSN Chief Executive Officer Benjamin Steinbruch wants to buy a customer for his iron ore reserves and supply steel to Europe’s growing economy. The bidding probably won’t surpass 550 pence, said Hitesh Agrawal, an analyst at Mumbai-based Angel Broking Ltd. Tata bid 500 pence, financed with about $7.2 billion of borrowings, almost eight times last year’s profit. CSN’s 515 pence offer would increase debt by as much as $2.5 billion, more than three times 2005 profit. Steel Mergers Tata Steel’s Dec. 10 proposal was 5.03 times Corus’s earnings before interest, taxes, depreciation and amortization, or Ebitda, based on the U.K. steelmaker’s earnings in the 12 months ended June 30. CSN’s bid is 5.73 times Corus’s Ebitda. In the world’s largest steel takeover, Mittal Steel Co. bought Arcelor SA last year for $38.3 billion. The offer was 4.46 times profit at Luxembourg-based Arcelor. Under the terms of the auction set by the U.K.’s Takeover Panel, CSN and Tata can submit new bids starting at 4:30 p.m. London time today. Any winner will be announced by 3 a.m. The auction will resume at 4:30 p.m. tomorrow if no deal is completed initially. Corus shares have more than doubled in the past year as consolidation in the industry accelerated. Last year, 349 mergers and acquisitions in the industry totaled $106 billion, up from 270 deals valued at $33 billion the year before, according to data compiled by Bloomberg. Shareholders Confused The Corus board recommended Tata’s first offer in October and then said it would recommend CSN’s December proposal instead, on condition that Tata drop its bid. “Shareholders were confused how the board could first recommend the Tata bid and then the CSN offer,” said Canto Fitzgerald’s Pope. “An auction process is the cleanest and clearest way to go now.” Steelmakers want to get bigger partly to cut the cost of buying raw materials such as iron ore. Cia. Vale do Rio Doce, BHP Billiton Ltd. and Rio Tinto Group control three-quarters of the world’s iron-ore trade. Arcelor Mittal, which is three times larger than its nearest rival, accounts for about 10 percent of world steel output. Global contract iron-ore prices have risen for four straight years, including a 19 percent gain in 2004, a 72 percent jump in 2005 and a 19 percent increase last year. Prices, which are typically negotiated between suppliers and users before the year starts, are 9.5 percent higher this year. Corus was created through the combination of British Steel and the Netherlands’ Royal Hoogovens in 1999. Chief Executive Officer Philippe Varin, who took over in 2003, has returned the company to profit after job cuts and plant closures. Lazard Ltd. and Goldman Sachs Group Inc. are financial advisers to CSN. UBS AG is also CSN’s corporate broker. Credit Suisse Group, JPMorgan Cazenove and HSBC Holdings Plc are advising Corus. NM Rothschild & Sons Ltd., Deutsche Bank AG and ABN Amro Holding NV are advising Tata.
Comment E-mail Print Share
First Published: Tue, Jan 30 2007. 02 25 PM IST
More Topics: Home |