Tata Steel has recovered fast from the punch delivered by Brazil's Companhia Siderurgica Nacional on Monday. The company is busy formulating a strategy to improve the offer for Anglo Dutch steelmaker Corus, a day after CSN outbid it.
Meanwhile, the Corus board has adjourned its extraordinary general meeting on December 20 to a later date to allow bidders and shareholders to review the offers.
A source close to the group said, "The Tata company is not backing out from the fight and will play sensibly." Though Tata Steel refused to comment on the issue, analysts said the company might increase its bid for Corus to 550 pence a share in response to the 515 pence a share offer from CSN.
"Such acquisition should not be seen from a short-term perspective only," an executive with a leading financial institution, which has a substantial stake in Tata Steel, said. Long term gain is the key, he added.
An investment banker said Tata Steel had also started discussions with the major shareholders of Corus, including Standard Life, which had a 7.8 per cent stake. When contacted, a Standard Life spokesperson said the company was "not commenting one way or another."
The head of equities at a Mumbai-based research firm said Tata Steel, which had initially bid 455 pence a share and yesterday raised it by nearly 10 per cent to 500 pence a share, might go as far as 550 pence a share. Shareholders will, however, have to wait a little longer to see the benefits of the acquisition.
"If the 500 pence a share offer, which amounts to an outgo of $9.1 billion, can reap benefits from the synergy of the combined entity in, say, three years, a $10 billion offer will take another year to get the full benefit," said the analyst.
According to him, CSN's offer of 515 pence a share pegs Corus' enterprise value at $11.6 billion, equivalent to 7.6 times the 2006 earnings before interest, tax, depreciation and amortisation. This makes Corus more valuable than its European peers.
An analyst said bankers were ready to fund a bid as high as $10 billion by Tata Steel. Some had already expressed their interest in doing it, he said.
An investment banker said mobilisation of funds would not be an issue for Tata Steel because it had the backing of Tata Sons, which controlled a market capitalisation of about $50 billion and revenues of about $22 billion.
CSN's financial director Octavio Lazcano told Brazilian analysts today it would make public its offer document for Corus "within days."
The Corus share was trading at 529.50 pence on the London Stock Exchange at the time of going to press, 0.28 per cent higher than yesterday's close.
