Tata buys steel giant Corus for £6.2bn

Corus, the Anglo-Dutch steel maker, was bought for £6.2bn by Tata of India in the early hours of this morning after a dramatic shoot-out with the rival bidder CSN of Brazil.

The Indian company triumphed at the end of a marathon quick-fire auction with a bid of 608p against CSN's offer of 603p. Together with Corus's debt, the takeover values the steel maker at £6.7bn. The result of the auction came as a surprise to industry observers who had expected the Brazilian company to prevail, particularly as it went into the contest with the highest bid on the table of 515p.

The merger of Tata and Corus will create the world's fifth biggest steel maker and give it greater ability to compete with the number one player, Arcelor Mittal, created from Mittal's takeover of its European rival last year.

The auction of Corus was conducted by the Takeover Panel and was only the third such occasion in which a company has been sold in this way - the previous two auctions involved the property group Canary Wharf and the internet company QXL Ricardo.

The sale of Corus to Tata completes a remarkable turnaround for the company which was on the verge of bankruptcy four years ago with its share price languishing at 10p. The group brought in a new chief executive, Philippe Varin, who orchestrated a recovery of the company helped by a surge in world steel prices and a cutback in capacity in its loss-making UK steel business.

The takeover price of 608p represents a 68 per cent premium to Corus's share price prior to Tata's initial approach for the company four months ago and also a hefty premium to the price Mittal paid for Arcelor.

The takeover battle began last October after Tata started the bidding with an offer of 455p a share. In December it raised its bid to 500p to try to ward off a rival offer from CSN. But the move was to no avail as the Brazilian steel maker trumped its Indian rival the following day with a bid worth 515p.

That is where the bidding stood until yesterday's dramatic late-night auction. The CSN team, led by its finance director Octavio Lazcano and banker Goldman Sachs, were based at the offices of its lead financial adviser Lazards in London's West End. Tata and its advisers, ABN Amro, Rothschilds and Deutsche Bank, took part in the auction from the offices of their lawyer Herbert Smith. The Corus chief executive M. Varin and his chairman Jim Leng were being kept in touch with the progress of the auction at the company's Millbank headquarters.

M. Varin began the trawl of the world steel industry for a partner 18 months ago and held initial talks with CSN which decided it was not interested in a merger. Industry sources say that had CSN bid then, it would have picked up Corus for a lot less money because Tata would not have attempted to derail the takeover with a higher offer.

M. Varin's predecessor at Corus, Tony Pedder, also held merger talks with CSN in 2003 but that deal broke down because of a decline in stock markets and fears that the incoming presidency of Luiz Inacio Lula da Silva in Brazil would undermine the country's economic prospects.

Corus employs around 40,000 people at four sites in the UK, in Port Talbot, south Wales, Scunthorpe, Rotherham and Teesside. It was created out of the 1999 merger between British Steel and Hoogovens of the Netherlands.