Arcelor faces revolt by investors over £3.4bn buy-back

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The Independent Online

Shareholders in Arcelor, which is being courted by Mittal Steel, are expected to vote down the company's controversial proposals for a £3.4bn share buy-back this week, in protest against the group's proposed merger with its Russian rival Severstal.

The board of Arcelor wants to buy back a quarter of the company's shares - a move which would result in Severstal's owner, Alexei Mordashov, increasing his stake in the business from 32 to 38 per cent. However, several of the key investors in Arcelor are opposed to the proposed bid for Severstal, and plan to vote against the buy-back at Wednesday's shareholder meeting to prevent Mr Mordashov from getting his hands on any more of the company.

The Arcelor investors who are opposing the Severstal bid are concerned about the Russian company's relative lack of transparency, and whether Arcelor's €13bn (£8.9bn) offer for the business is justified. The buy-back has also proved controversial, as Mr Mordashov will not be required to make an offer for Arcelor, despite his stake rising above the 33.3 per cent level beyond which an offer is normally mandatory. If the buy-back were to go ahead, Mr Mordashov would also be allowed to elect two of the four members of Arcelor's strategic committee. A further shareholder vote will then take place on 30 June, to secure approval for its takeover of Severstal.

A no vote at this Wednesday's meeting could re-open the door for Lakshmi Mittal, the billionaire owner of Mittal Steel who has made a €26bn hostile offer for Arcelor. Mr Mittal last week hinted that there was still a chance of persuading the Arcelor board into a U-turn. The board is believed to have suggested that they would provide a recommendation if Mr Mittal raised his offer again.

At the end of last week, several key Arcelor shareholders were desperately trying to canvass support for a no vote on both the buy-back and Severstal takeover. Arcelor requires just 50 per cent of the vote to push ahead with both proposals, which leaves it needing to find only a small amount of additional support beyond Mr Mordashov. Some 30 million Arcelor shares traded hands in the market on Friday, sparking rumours that Mittal's supporters were buying into the stock to help block the Severstal deal. Roman Zaleski, a French-Italian financier, is believed to have been one of the buyers, reputedly increasing his holding in the company from 5 to 7 per cent.