A head-to-head bid battle for former British Steel firm Corus is due to get under way today.
The £5bn (€7.5bn) auction – set to involve Brazilian firm CSN and India’s Tata Steel – has been established by the UK’s Takeover Panel and will consist of up to nine bidding rounds starting at 4.30pm today.
The winner is expected to be announced at 3am tomorrow. If the auction fails to go to nine rounds it will begin again at 4.30pm tomorrow.
The auction is to be held in private, with no updates expected until the final announcement at 3am.
A tie-up of either CSN or Tata with Corus would create the world’s fifth largest steel group capable of producing about 24 million tonnes of steel a year.
The fight for Corus began in October when Mumbai-based Tata tabled a £4.1bn (€6.2bn) bid for the group and, in December, the Corus board recommended a revised £4.7bn (€7.1bn) offer from Tata.
But, just hours later the board confirmed it had approved a 515p a share, or £4.9bn (€7.4bn), offer from Rio de Janeiro-based Companhia Siderurgica Nacional - CSN.
Reports have since speculated Tata could be prepared to pay between 530p and 550p a share.
Both firms have had their takeover offers approved by the European Commission on the grounds that a tie-up between Corus and either company would not hamper competition in the European Economic Area.
In addition to the share price CSN said it will pay £138m (€209m) into the Corus Engineering Steels pension scheme compared with the £126m (€190m) proposed by Tata. Both companies have agreed to increase contributions to the scheme from 10% to 12% until March 2009.
Last year Corus was the ninth largest steel producer in the world with 18.2 million tonnes of output. It banked pre-tax profits of £580m (€878m) on turnover of £10.14bn (€15.3bn), although lower selling prices and higher costs hit operations in the first half of this year.
Corus, which was set up through the merger of British Steel and Dutch rival Hoogovens in 1999, employs 47,300 people worldwide including 24,000 in the UK at sites including Scunthorpe, Rotherham and Port Talbot.
Last year Tata Steel, part of the Indian conglomerate Tata Group, was ranked 56th in the list of steel makers around the world with output of 5.3 million tonnes.
The Tata Group has operations in more than 54 countries across six continents and the companies export products and services to 120 nations. Its steel arm was set up in 1907 and is now India’s biggest private sector steel firm.
The company claims to be among the lowest-cost steel makers in the world and its products are targeted at the automotive and construction industries.
A tie-up with Corus would give Tata Steel its first exposure outside Asia.
CSN, founded as a state-owned company in 1941, attempted a tie-up with Corus four years previously – but Corus rejected the move citing concerns over the health of the Latin American economy.
The firm was privatised in 1993 and is now one of the largest integrated steel companies in Latin America. It ranked 48th in the list of global steel makers with output of 5.6 million tonnes.
The company is one of the biggest low-cost steel producers due to huge stockpiles of iron ore in its Casa de Pedra mine in Minas Gerais, which yields 16 million tonnes annually.
The supply helps CSN maintain some of the highest profit margins in the industry due to the low running costs and large amounts of resources.
CSN’s secure supply of high-quality iron ore, limestone and dolomite would allow Corus to become self-sufficient and hold on to profits.