UPDATE 3-Tata proposes $7.6 bln Corus bid, deal close http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-10-17T134444Z_01_BOM179950_RTRIDST_0_MINERALS-TATA-CORUS-UPDATE-3.XML&rpc=66&type=qcna Tue Oct 17, 2006
(Releads, adds detail, analysts' quotes)
By Michael Smith and Siobhan Kennedy
LONDON/MUMBAI, Oct 17 (Reuters) - India's Tata Steel Ltd (TISC.BO: Quote, Profile, Research) proposed a 4.1 billion pound ($7.6 billion) takeover of Anglo-Dutch steelmaker Corus Group (CS.L: Quote, Profile, Research), while sources close to the matter expected an agreed deal as soon as the end of the week.
Such a deal would be the largest ever foreign takeover by an Indian company and would follow Mittal Steel's $31 billion acquisition of rival Arcelor this year as consolidation in the steel sector gathers pace.
Corus's shares, which have risen in recent weeks in anticipation of a bid, were down 0.3 percent at 478-1/2 pence by 1300 GMT on Tuesday after Corus said it had received a "possible recommended" takeover proposal from Tata of 455 pence-a-share in cash.
The shares were above the offer price, however, because analysts and investors anticipated a higher bid in line with recent Indian press reports, which pitched Tata's bid closer to 500p.
While Tata officially said there was no guarantee it would make a firm bid, the sources said Corus's board had given tacit approval to the bid and had already given Tata access to its books to firm up the offer.
"The talks are pretty advanced ... they have done due diligence, and they're ready to move very quickly," one of the sources told Reuters, adding that Tata had secured financing for the deal from ABN AMRO (AAH.AS: Quote, Profile, Research), Deutsche Bank (DBKGn.DE: Quote, Profile, Research), Standard Chartered (STAN.L: Quote, Profile, Research) and one other unnamed bank.
Typically in takeover situations, a board would not give a suitor access to its confidential data unless it was happy with the size of the preliminary offer.
The sources said a friendly deal could come as soon as the end of the week, while a Tata official, who declined to be named, said it could slip to the middle of next week.
Shares in Tata Steel were 0.9 percent higher at 515.70 rupees in Mumbai.
STEEL FIRMS UNDER PRESSURE
Global steelmakers are under pressure to cut costs and secure precious supplies of raw materials as China switches from being a net importer to becoming an exporter of steel.
Tata Steel said its offer was worth around $10 billion including debt. At 455 pence a share, Corus's market capitalisation would be 4.1 billion pounds, according to Reuters data, implying outstanding Corus debt of around 1.4 billion pounds.
A deal would make Tata Steel the world's fifth or sixth-largest steel producer, analysts said.
"If the deal goes through, then Tata Steel will get into the league of top five steel producers in the world. While Tata Steel has access to iron ore, Corus doesn't have natural resources," said Jitesh Ranawat, a metals industry analyst with brokerage Pranav Securities Ltd. in Mumbai.
Corus's shares have risen steadily since Mittal snapped up Arcelor earlier this year as investors have seen the London-listed steelmaker as being vulnerable to a takeover. They spiked on Oct. 5 after Tata said on it was considering a takeover bid.
"The company is in discussion with the board and management of Corus Group Plc, and it has made an indicative non-binding offer to acquire 100 percent equity in Corus Group Plc through a recommendatory offer route of 455 pence per share in cash," Tata said in its statement on Tuesday.
Corus, created through the merger of Dutch firm Hoogovens and British Steel in 1999, agreed in March to sell most of its aluminium assets, which analysts said paved the way for the company to take part in consolidation.
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