The Brazilian steel giant Companhia Siderurgica Nacional (CSN) may have sparked a bidding battle for Corus Group on Friday by making a provisional bid of US$8 billion for the British steel company.
The Brazilian offer, worth US$8.99 a share, tops an offer of US$8.62 a share from India's Tata Steel that Corus had agreed to last month. CSN said it would not make a firm offer until it had closely reviewed Corus' operations and finances. It also said it wanted to obtain the full support of Corus' board and secure financing for the acquisition.
Investors in London drove Corus' stock price up 4.76 percent to close at US$9.39 a share on Friday, signaling that they expect Corus will fetch an even higher price.
The sudden interest is a marked change from a few months ago. Corus was on the block for more than a year before the Tata offer, and it had held discussions with several of rivals, but found no takers.
The top two steel makers, Arcelor and Mittal Steel, combined to create a giant global operation last spring.
CSN said a merger with Corus would create one of the top five largest global steel groups, with 24 million tonnes in annual steel production. CSN added that such a merger would enable Corus to develop a presence in Brazil and other emerging markets and benefit from low-cost iron ore from CSN's Casa de Pedra mine.
Corus shareholders are due to meet on Dec. 4 to vote on the Tata Steel offer. But CSN's offer and the jump in Corus' share price could delay that vote.
In a statement on Friday, Corus said that it "notes the recent announcement by CSN and confirms that it has this afternoon received an approach."
"A further announcement will be made in due course," the company said.
Tata Steel had no immediate comment. One person with knowledge of the company, who spoke on the condition of anonymity because of the fluid nature of the situation, said that Tata may wait until CSN made a firm offer before deciding whether or not it would raise its bid.
CSN's chairman and chief executive, Benjamin Steinbruch, and Corus chairman, James Leng, met in London on Friday to discuss the tentative offer, said another person involved in the discussions.
CSN is expected to start its review immediately, and a firm offer could be made in days, this person said.
In 2002, Corus made an offer for CSN, but it was shelved after Corus' stock price plummeted because investors were concerned about the amount of debt that would have been necessary for the deal.