Markets not keen on Tata hiking Corus price again

Even as the Tatas are getting ready with their strategy to counter the CSN takeover offer for Corus, stock markets seem to be not very happy with the prospect of the Tatas entering into a bidding war with the Brazilian company.

Even as the Tatas are getting ready with their strategy to counter the CSN takeover offer for Corus, stock markets seem to be not very happy with the prospect of the Tatas entering into a bidding war with the Brazilian company.

Though the Sensex recovered by 186 points, shares of Tata Steel fell as much as 3.7 per cent before closing 1.3 per cent lower at Rs 436.55. The market was worried by reports that Tata Steel could raise its bid to 550 pence per Corus share, raising the cost to over $10 billion, to trump Companhia Siderurgica Nacional’s offer of 515 pence.

“Definitely the market is not liking it. It will be more beneficial for Corus shareholders than Tata’s,” said Gajendra Nagpal, director at Unicorn Investments. “Tatas may benefit in the long run. But nobody is interested to wait till that time.” Tata Steel had raised its initial bid of 455 pence to 500 pence on Sunday. Its shares have fallen around 15 per cent since October 20, when Corus approved the initial offer.

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“We feel that Tata Steel might not outbid/match CSN as it will stretch their balance sheet considerably and it might take a lot of time before synergies between Tata Steel and Corus materialise,” said Vishal Chandak of Emkay Share and Stock Brokers. According to corporate sources, Tata Steel is formulating a strategy to improve its offer for Corus Group after CSN announced a higher bid.

Though Tata Steel refused to comment on the issue, analysts were quoted as saying that the company might increase its bid for Corus to 550 pence a share in response to the 515 pence a share offer from CSN. Banking sources said Tata Steel may seek the help of Standard Life Investment, the largest shareholder of Corus, to support its bid. It may be recalled that Standard Life, which holds a 7.8 per cent stake in Corus, had come out strongly against Tata’s first offer of 455 pence, saying it was lower than expectations.

CSN and its associates now hold close to 20 per cent stake in Corus. CSN holds a 3.8 per cent stake while UBS and Goldman Sachs Group, advisors to CSN, and Barclays, which is part of the banking syndicate financing the bid, had revealed they held 7.36 per cent, 4.01 per cent and 4.2 per cent stake respectively in Corus. (With agencies)