Tata Steel is set to raise its offer for Corus Group to try to trump Brazil's CSN, kickstarting an auction for the Anglo-Dutch steelmaker, sources familiar with the matter said on Monday.
The higher bid will then need to be exceeded by CSN if the Brazilian company wants to remain in the race to buy Corus, in a rare quickfire auction process being organized by the U.K.'s Takeover Panel.
European regulators helped level the field between bidders a day before the deadline as the European Commission cleared CSN to buy Corus. The approval from Europe's top competition authority followed its clearance in December of a Tata bid. The winner of the battle, which has pushed shares in Corus to seven-year highs, will become the world's fifth-largest steel maker.
Companhia Siderurgica Nacional has agreed to buy Corus for 515 pence per share, or 4.9 billion pounds ($9.6 billion), topping two offers from Tata Steel. The UK had set both companies a deadline of January 30 to modify their offers.
Britain's takeover regulator then set out more specific procedures on Friday, at the companies' request, for the final stages of the bidding war. If by the deadline both companies remain in the race to buy Corus, the Takeover Panel said it would allow them to go through as many as nine rounds of rapid-fire bidding behind closed doors.
The companies will be entitled to modify their offers in each round, the Takeover Panel said, adding they would not need to announce their bids until the auction is finished and a winner is announced by the regulator. That is expected to happen Wednesday, it said.
Analysts estimated Tata could likely bid above that price. "Reports of 600 pence is too aggressive. Five hundred and eighty pence could be the highest which Tatas could go up to," said Kanan Shah, analyst at Networth Stock Broking.
Tata Steel opened the bidding for Corus at 455 pence a share and raised it to 500 pence. CSN has made a sole bid of 515 pence per share. "They (Tata Steel) are serious about the acquisition since it would open up access to new markets and a better product profile. They could make another bid," said one analyst who did not want to be identified.
Macquarie Research in a note last month said "excluding any synergy benefits, we estimate the deal would be EPS (earnings per share) neutral for Tata Steel at 540 pence per Corus share."
Both companies are keen to get Corus so they could be a significant player in the consolidating steel industry, where Dutch-based Mittal Steel last year bought Luxembourg's Arcelor to create the world's biggest steel-maker.
If Tata won the battle for Corus, it would be the biggest ever overseas acquisition by an Indian firm. Tata declined to comment on whether it would raise its offer.