Corus casts doubt on £2.7bn CSN deal

Corus, the Anglo-Dutch steel group, cast further doubt yesterday on whether it will proceed with the £2.7bn takeover of the Brazilian steel maker CSN, saying the deal may be subject to delay or renegotiation.

The move came as Corus confirmed that it is selling its downstream aluminium operations to Pechiney of France for €750m (£472m). The proceeds will be used to cut Corus' debt further and will take borrowings down to about £700m compared with £1.7bn at the end of June.

The CSN deal has been thrown into doubt by the near certainty that a left-wing candidate will win Sunday's Brazilian elections. Although Luiz Inacio de Silva, or "Lula" as he is known, the leader of Brazil's Workers' Party, has pledged to maintain the country's financial discipline, the prospect of his election has unnerved investors and hit the value of the Brazilian currency.

Corus, run by its chief executive Tony Pedder, signed a non-binding heads of agreement with CSN in July and had planned to reach a definitive agreement in mid-November, paving the way for shareholders to vote on the all-share takeover in the first quarter of next year.

However, a spokesman for Corus said yesterday: "There could be a delay in the CSN deal due to the uncertainty politically, economically and in the financial markets. The fact that the agreement is non-binding means we can revisit the terms of the deal."

Under the agreement announced in July, Corus would pay an 87 per cent premium for control of CSN. Corus shareholders would emerge with 62.4 per cent of the combined group.

The Pechiney deal is subject to regulatory approval in Europe and the US. The Corus spokesman said: "We would hope to have as quick a passage as possible although you can never be sure."

One of the areas of concern for competition authorities may be the increased market share the deal would give Pechiney in the European aerospace market. There are only a handful of companies in Europe making aluminium fuselage and wing parts for commercial aircraft and Pechiney could emerge with a dominant position.

The deal covers Corus' rolled products and extrusions businesses, which employ 4,700 people and have rolling mills in Germany, Belgium and Canada and extrusion plants in Germany, Belgium and China.

Its aluminium smelters in Germany and the Netherlands are being sold separately.