Corus investors say Tata bid is too low

Shareholders in Corus, including its largest investor, Standard Life, have accused the company's management of selling out too cheaply after it agreed a £4.3bn takeover by its smaller Indian rival Tata Steel.

Corus has met with numerous companies over the past year to consider ways to increase its presence outside Europe through a merger or partnership. After meeting with companies in Russia and Latin America, the Anglo-Dutch steel producer announced the Tata deal yesterday - talks began last November.

Philippe Varin, Corus's chief executive, said: "This offer comes at the right time. It is the right offer with the right partner."

Ratan Tata, the head of Tata Steel, who is to be the non-executive chairman of the combined group, said: "The deal reflects fair value and we hold to that view."

Corus shareholders proved to be less impressed with the 455p cash offer. A spokesman for Standard Life Investments said: "The 455p-per-share offer by Tata for Corus is lower than we would have expected the board of Corus to agree to and recommend. The trading performance of Corus has been very strong and produced very attractive cash flows, which we believe could be worth more than the current price being offered by Tata."

Standard Life, which owns 7.9 per cent of Corus shares, said the offer does not fully reflect the value of the company's position in a consolidating market. It also argued that the quality of the steel company's earnings is likely to improve due to less volatile market conditions and that the synergy benefits of the merger are not factored into the bid.

Herve Mangin, a fund manager with Axa European Opportunities Fund, said that Tata's bid multiple was at least 10 per cent below average recent deals in the sector. Axa is a top-10 Corus shareholder with a 2.9 per cent stake. "I think that Tata's bid is too low and that some other players like Severstal and CSN could react. Corus is the only sizeable asset in Western Europe that can be bought," he said.

Neither shareholder committed to voting against the merger, however. Unless a higher offer does emerge, Tata's bid remains the only offer on the table. A source familiar with the situation said he expects companies such as Russia's Severstal, which has yet to rule out a bid, and Brazil's CSM to take a second look. The source said that given Tata's deal has been made in cash and a rival would have to pay a substantial premium, a competing bid appears improbable. "There is nowhere else in the world that this sort of asset is available, but picking it up on the cheap is no longer an option. It is highly unlikely that anyone [else] will come up with an all-cash bid."

Standard Life's David Cumming has previously said that Corus shares could potentially be worth as much as 600p a share if a bidding war emerges. The shares fell 1 per cent to 473.5p after the deal was announced, remaining above the offer price.

The merger needs to be approved by more than 50 per cent of shareholders and Corus has agreed to pay an inducement fee of 1 per cent of the value of the deal if the merger collapses. Tata has agreed to pump £126m into Corus's pension funds and also pledged to increase the employer contribution rate from 10 to 12 per cent.

The merger represents the second mega-deal in the global steel sector this year after Mittal Steel's $31bn (£16.5bn) takeover of Arcelor. European steel companies are under pressure to cut costs due to an influx of steel from emerging markets, such as China. The deal will combine the European company's leading-edge manufacturing techniques with Tata's low-cost slab steel.

The transaction is the largest ever made by an Indian company and will create the world's fifth-largest steel producer.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test
Tour de France 2015: Twins Simon and Adam Yates have a mountain to climb during Tour of duty

Twins have a mountain to climb during Tour of duty

Yates brothers will target the steepest sections in bid to win a stage in France
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy