Arcelor leaves door open to Mittal bid

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The Independent Online

Arcelor unexpectedly left the door open last night for a multibillion takeover by its rival, Mittal Steel, that would create a global steel giant.

Directors of the Luxembourg-based steel maker, which had initially given a firm rejection to the overtures from the Indian-born magnate Lakshmi Mittal, said yesterday they wanted to "examine the contents" of the offer.

At the end of their board meeting, Joseph Kinsch, Arcelor's chairman, said: "The board expressed its wish to examine Mittal Steel's business plan in order to be able to assess the industrial merits as well as the value of the Mittal Steel shares offered in exchange."

In a statement Arcelor's directors asked the management board to study the terms of the bid and report back to the board. The board of directors also reiterated the management board's mandate to present it with all options which are "in the interest of all stakeholders".

Mr Mittal dramatically raised the stakes in the battle for control of Arcelor on Friday by upping his bid by a third to €26bn (£18bn), increasing the cash element and offering to relinquish family control over the merged company. The surprise move came just one day after he formally launched his bid.

In last night's statement Arcelor said Friday's offer in effect confirmed its initial assessment that the opening bid was "greatly lacking in terms of valuation and particularly inadequate as regards corporate governance".

Arcelor had previously refused to enter into talks with Mittal during the four months the takeover tussle has lasted, and did not respond to the revised bid on Friday.

It has fiercely resisted the advances from Mittal since January and has even enlisted the backing of governments across Europe, which have expressed reservations over the deal as they fear huge job losses.

A combination of the world's two largest steel companies would create a global steel giant, with 10 per cent of the global market and production of 115 million tonnes a year, more than three times the size of the closest rival.

On Friday, Mr Mittal, the richest man in the UK and one of the richest in the world with assets of about £15bn, described the fresh offer as "compelling" but refused to rule out raising the bid again. The new bid is worth €37.74 a share, 34 per cent higher than Mittal's first offer in January and 18 per cent higher than Arcelor's closing share price on Thursday.

While the initial offer was funded three-quarters in Mittal shares and one-quarter in cash, the revised offer has a bigger cash element worth €7.6bn, or 29 per cent of the proposed offer price. Arcelor has said it would favour an all-cash bid.

Mr Mittal made further significant concessions by announcing that he would surrender control over the merged company. He agreed to the "one share, one vote" principle which will reduce his family's stake to 45 per cent.

He denied the revised offer was an "act of desperation", arguing a higher price was justified in the light of the growth potential of the combined group and the re-rating the steel industry had undergone since the beginning of the year.

Arcelor has urged shareholders to preserve the company's independence and has tried to win their backing with a €5bn return of cash. It has also promised an increased dividend for last year. Moreover, the group has adopted a "poison pill" defence by ringfencing its North American assets that Mittal plans to sell off.

Some analysts thought that Arcelor should accept the increased offer as it took into consideration the concerns raised by the company, some of its shareholders and the Luxembourg government.