Mumbai: Reports suggest that Tata Steel has called an unscheduled board meeting on Thursday to discuss the fallout of CSN's counter offer for Corus. However Tata Steel has denied reports on the Board meet.
But what are CSN's chances compared to Tata Steel, and who has the edge? Money talks - but a higher price is not the only arrow in CSN's quiver. The Brazilian steel maker has been buying Corus stock to shore up ammunition.
On Thursday, November 16, a day before it counter bid on Corus, CSN bought a 2.33 percent stake in the Anglo-Dutch steel maker through a subsidiary company Supernova Acquisitions at 472 pence a share. It's total stake now stands at 3.8 percent.
Interestingly, its bankers also hold stakes in Corus. Barclay owns 4.7% and Goldman Sachs another 2 percent with UBS. This 6.7 percent could likely back CSN in its chase for Corus - unless of course, investment banking chinese walls come to Tata's rescue.
Add to this list - Standard Life Investments, Corus' single largest shareholder at 7.9 percent. Standard Life has made it clear that it thinks of Tata's offer as too low. So unless the Tatas substantially up their bid, this shareholder may not be in favour either.
Potentially, 18.4 percent of Corus' shares are working in CSN's favour, though that's not all that it has to offer. While India's leaning against ore exports, Brazil, the largest iron ore exporter in the world, is more liberal. And just like Tata Steel, CSN is also tempting Corus with low cost ore from its world's largest Casa de Pedra mine and access to emerging markets.
CSN produces about 5 MT of steel a year, as presently does Tata Steel. CSN has massive ambitions to expand its production and output as does Tata Steel, and both companies have access to very high quality iron ore. They are both similiar companies and are both ambitious,' comments Patrick Flockhart, MD, Steel Biz Briefing.
But here's Tata Steel's trump card. To begin with, it's a more professionally run company versus CSN's entrepreneurial nature. And it has a much healthier balance sheet. Tata Steel is an under-leveraged company with a low debt-equity ratio of 32.86 compared to CSN's massive 135.94.
Infact, CSN ended the third quarter with a net debt of $3.19 billion - an over leveraged position that's also affecting its bid for US-based steel maker Wheeling-Pittsburgh.
While these qualitative factors may influence Corus' board, shareholders may only be swayed by money. It's going to be a tough and expensive battle for Tata Steel.
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