Arcelor poised to snub Mittal again

The board of the steel group Arcelor is today expected to announce the rejection of an improved offer from Mittal Steel.

Arcelor held a board meeting yesterday to formally discuss Mittal's €26bn (£17.8bn) bid, made last month. The bid was an improvement on the initial approach made in January.

Arcelor directors also considered their response to a revolt among the company's own shareholders over its alternative €13bn "white knight" deal to buy Russian group Severstal instead.

"I arrive with a very positive state of mind," board member Fernand Wagner told reporters on his way into the meeting at Arcelor's Luxembourg HQ.

Separately, it emerged yesterday that Alexei Mordashov, the Russian tycoon who owns Severstal, has personally written to Arcelor shareholders urging that they accept a tie-up between the two companies.

A meeting will be held on 28 June for Arcelor investors to vote on the Severstal transaction.

However, a group of rebels are furious that, under the rules adopted, the deal can only be stopped if more than 50 per cent of the entire issued share capital of the Luxembourg group votes against it.

The dissident shareholders, who account for 30 per cent of Arcelor, want to hold an extraordinary general meeting to change the voting process on the Severstal deal.

So far, the Arcelor board's tactic has been to concede the fact that the rebels are entitled to call an EGM, while insisting that the event take place after the vote on the transaction - rendering the EGM irrelevant.

The concerned shareholders have threatened legal action against individual Arcelor directors over the issue.

They have also said that, if the 28 June meeting goes ahead, they will vote at the event for a postponement.

The scheduled meeting on the Severstal deal also comes before the 5 July closing date for the Mittal offer - another cause of frustration for the rebels, and also the Mittal camp.

It is unclear whether Mittal will keep a minority stake in Arcelor if it fails to get more than 50 per cent. In a further twist of voting tactics, Mittal could deploy its minority stake at a future Arcelor EGM in conjunction with the company's rebel shareholders.

Rotterdam-based Mittal, majority owned by the billionaire Lakshmi Mittal, and Arcelor are the two largest steel companies in the world. A merger would create a powerhouse capable of producing more than 100 million tonnes of steel a year. It would have revenues of almost £40bn and a workforce of 320,000, but Arcelor has consistently resisted advances from Mittal and has said a deal with Severstal represents better value for shareholders.

A tie-up with Severstal would give the combined company sales of £31bn and production of 70 million tonnes of steel a year.