CORUS will recommend today a £5.5 billion bid from Tata, the Indian conglomerate, forcing SeverStal, the Russian steel giant controlled by Alexei Mordashov, to decide whether to go hostile.

The deal will involve the former British Steel group losing its London listing for the first time. Tata is in the driving seat, complete with break clause, making a counter hostile approach from Russia or Brazil expensive and less likely. Time is running out for SeverStal, which has refused to rule itself out of launching a rival offer for Corus. SeverStal did not return calls yesterday.

CSN, of Brazil, and Novo- lipetsk, of Russia, have also been named as potential rival bidders.

The sale of Corus to the Indians marks a blow to their rivals, given the group’s strong European presence and client list. Today Corus will back a 455p a share, or £4.1 billion, takeover by the steel arm of Tata. The former British Steel also has about £1.4 billion of debt, giving the deal an enterprise value of £5.5 billion.

In the biggest takeover by an Indian company of an overseas business, Tata is expected to stick closely to the 455p a share indicative offer that it made on Tuesday, despite Corus shares trading at a higher level. Yesterday the shares lost 8½p to close at 478½p, as the market absorbed rumours that Tata would not attempt a knockout blow to deter potential rivals by making a higher offer than it had outlined.

Given that Tata’s offer values Corus at 6.6 times the consensus expected ebitda (earnings before interest, tax, depreciation and amortisation), the bid is viewed by some as a full one. Mittal’s recent bid for Arcelor, which was regarded as a good steel business, was only 4.8 times ebitda.

Today Tata Steel will spell out its plans for Corus and its operations in Europe. A takeover of Corus will propel the Indian business to the fifth place in the world rankings of steel producers, with an output of nearly 25 million tonnes a year. Tata Steel, which produces almost five million tonnes a year, is fiercely ambitious and wants to grow sixfold within ten years.

Sources close to Tata believe that the takeover will mean the delisting of Corus from London, ending an 18-year presence that began when British Steel was privatised in 1988. Corus was formed in 1999 when British Steel merged with the Dutch steel producer Hoogovens. Tata could, however, want to retain the New York listing of Corus, which stems from the days when British Steel had built up a large complement of American investors.

Although the Corus board, led by Philippe Varin, chief executive, is recommending the offer, the company had wanted a joint venture with another steelmaker as opposed to an outright takeover. Four years ago it attempted a merger with CSN, although the deal collapsed. Under M Varin’s leadership Corus has been looking for a partner for more than a year, since a three-year recovery plan began to bear fruit and after the sale of the aluminium business. None of Corus’s three big shareholders — Standard Life, Barclays and Legal & General — would comment on whether the deal was good value.

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