Sunday, September 16, 2007

Arun Gandhi on Tata Corus Deal

Arun Gandhi - the Tata Corus deal maker in an interview to Moneycontrol talked about the deal. Some of the highlights:

Deal Timing:
The timing of the deal was crucial as during that time the Russian companies were undergoing IPO and if the deal had been delayed then they would have also jumped in with their IPO collections thereby increasing the competitive pressures of the bid.

UK Takeover code:
The UK take over code governs the deal making process to ensure fair deal to the shareholders. The law requires regulations on the break fee and stake building which acts as defense against the competition. The break fee has to be less than 1% of the transaction value and also the company directors need to certify that the break fee is in interest of shareholders. The stake building is allowed upto 30% prior to announcement. Post announcement stake building is risky as the access to confidential information during due diligence may expose the bidder to criminal insider trading prosecution and also it does not get a right to vote in the bidding. The UK law also has a provision to prevent financial assistance - target company (only public companies) to let the bidder use its assets or guaranties to secure financing.

608 pence:
In the last round of bidding CSN topped up at 603 pence and Tata wrapped up the deal at 608 pence. The price was chosen at 5 pence higher as there was 6 weeks time to go after the auction date and the Corus share price would have included the time value of money thereby keeping the share price lower than 603 pence. CSN at this point might had created trouble as it could have bought as many shares as it could at a price less than or equal to its bid of 603. Tata hence had to keep the share price above 603 and hence a bid of 608.

No comments: