London: Tata Steel, which has offered to buyout Anglo-Dutch steelmaker Corus, could face competition from Russian firms including Severstal, whose counter bid had complicated Mittal Steel's takeover of Arcelor earlier this year.
Two Russian steelmakers – Severstal and Novolipetsk – and Brazil's CSN (Companhia SidergicaNacional SA) are said to be mulling over launching possible takeover bids for Corus and speculation could lead to further surge in Corus' share price, market observers said.
Corus' shares closed more than five per cent above the offer price of 455 pence per share proposed by Tata Steel on Tuesday at the London Stock Exchange on market expectations for a counter bid and a possible increase in the Tatas' offer.
The shares were trading further up by 0.7 per cent at 485.25 pence on LSE on Wednesday.
However, some analysts argue that Tata Steel might not raise its bid and Corus would accept the offer, as the company is believed to have completed its search for a potential suitor over the past few months.
While Tatas' offer of 455 pence per share leads to a market value of around 8 billion dollars for the London-based company, the Indian steel giant has pegged Corus' enterprise value at 10 billion dollars.
Analysts said the final deal could be worth $10 billion, taking into account Corus' market value, outstanding debts and current cash position. While the company's current cash holdings could be used for part-payment of debts, the remaining debt would be taken over by Tata Steel, they added.
At the end of June quarter this year, Corus had a net debt of $2.62 billion while its total cash and cash equivalents stood at $451 million.
Corus' share price has jumped about 20 per cent since the reports first appeared earlier this month about a possible takeover bid from Tata Steel.
Earlier in June, shares of Corus had soared higher on reports that Severstal might launch a takeover bid for the company.
Incidentally, Mittal Steel, which succeeded in its attempt to acquire Arcelor after a five-month long battle, had to overcome a counter bid from Severstal for the European steelmaker.
A report in Financial Times suggested today that Russia's Severstal and Novolipetsk might still make a bid for Corus.
However, The Independent reported that Corus' board was close to recommending the 455 pence per share all-cash offer from Tata Steel and a deal could be just days away.
Corus has said that Tatas' proposal is a "recommended offer" indicating that the talks are in advanced stage.
Tatas' due diligence on the deal is complete and the final details of the financing are being put in place, it added.
Corus was formed through combination of British Steel and Netherlands' Royal Hoogovens in 1999. The company had returned to profitability in 2003.
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