Mittal Steel rules out raised Arcelor offer

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The battle for control of the Luxembourg-based steel company Arcelor looks like coming down to a straight shareholder vote after Mittal Steel yesterday ruled out raising its €26bn (£18bn) offer in return for a board recommendation.

Mittal said that its offer to improve the terms of the deal related only to the corporate governance arrangements and not valuation. "Mittal Steel has not made any proposal to improve the financial terms of its offer and has no intention to do so," the company added.

The statement came in response to confirmation that Arcelor had unanimously rejected Mittal's €37.74-a-share bid at a meeting of the company's board on Sunday. In an attempt to evade Mittal's clutches, Arcelor has announced a rival plan to buy the Russian steel company Severstal for €13bn - a deal which Arcelor claims values it at €44 a share. Mittal claimed, however, that the valuation put on Arcelor by the Severstal deal was "entirely fictitious and without market substantiation", and reiterated that its bid, which offers a 70 per cent premium, remained "compelling".

The Mittal offer closes on 5 July - five days before Arcelor shareholders vote on the Severstal deal at their annual meeting. In order to block the Severstal takeover, more than 50 per cent of Arcelor's entire share capital has to be voted against the deal.

A group of rebel shareholders has put forward a motion which would compel the board to convene an extraordinary meeting at which the Severstal deal would require a two-thirds majority of those voting. Arcelor has agreed to the EGM, but the outcome will be academic as it will not take place until after the transaction has been voted on.

Arcelor also announced yesterday that its €6.5bn share buyback - which will be voted on by shareholders on 21 June - will be based on a share price of €44.