Arcelor's 'court jesters' snub offer from Mittal to raise bid

Lakshmi Mittal, the Indian steel magnate, attacked the directors of Arcelor yesterday, describing them as "court jesters" for rejecting his offer to raise his €21.5bn (£14.6bn) bid for the rival steel maker in return for a recommendation from the board.

Mr Mittal also volunteered to overhaul the board of his family-owned company Mittal Steel to overcome corporate governance concerns voiced by Arcelor and announced that François Pinault, the former chairman of the French luxury goods giant PPR, was being made a director.

Arcelor, which is listed in Luxembourg but has a large number of its operations in France, rejected the overtures from Mittal, refusing to sit down and talk on the grounds that it still did not have enough information on how the new merged company would function. It also pointed out that the Mittal family would continue to control a majority of shares in the combined business. The Mittal Steel chairman responded by saying that dealing with Arcelor was "like opening a door to find a brick wall behind it" and accused its directors of behaving "more like court jesters than fiduciaries for investors".

His son Aditya Mittal, the company's finance director, added: "Arcelor are constantly setting up roadblocks for us including invoking old French laws."

Mittal is due to send out its formal offer document to Arcelor shareholders next week and is counting on investor pressure forcing the company to the negotiating table.

Earlier, Mr Mittal disclosed that he had had several contacts with Arcelor's chairman, Joseph Kinsch, by telephone and e-mail over a two-week period stretching from late April to early May in which he set out the terms for a recommended offer. Key among these was a commitment to "revise" the value of the bid in return for the support of the Arcelor board. Mr Mittal also offered to reform the voting structure of the new company and scrap his right to put in his own directors.

He declined to say how much his bid would be raised by but analysts suggested it might have to be increased by up to 20 per cent to force Arcelor to the negotiating table. Mittal's current cash and shares offer values Arcelor at €33.5 a share - a premium of almost 50 per cent to its price before the bid was launched. Arcelor shares closed last night at €35.56 - some 6 per cent above the offer price.

Mr Mittal said he would reform the board of Mittal Steel so that it had 14 directors - six each from Mittal and Arcelor and two independent directors. He also offered to change voting rights in the new company so that one share counted for one vote. However, Mittal also proposed that shareholders who were long-term investors would have their voting rights doubled - a mechanism that would keep the Mittal family's voting rights at just over 50 per cent.

At present, the Mittal family controls 88 per cent of shares in the company and 64 per cent of the voting rights. These would both come down to 50.4 per cent under the latest Mittal offer. In appointing M. Pinault to its board, Mittal Steel hopes to increase the influence of its lobbying efforts in France, despite the entrepreneur's controversial track record. Mr Mittal said M. Pinault was "one of Europe's most successful entrepreneurs and his guidance and business knowledge will prove an invaluable asset".

The Arcelor camp said quite apart from failing to say how much the bid would be raised by, Mittal had failed to give sufficient information to enable it to assess its intentions or its industrial, social and business plans. Mittal replied by saying it had already handed over a 100-page industrial plan but was not prepared to give a rival steel maker commercially sensitive details of its business plan when Arcelor had refused even to sit down and talk.