Mittal on his mettle with steel bid

Anglo-Indian tycoon puts up $560m in three-way fight for Polish firm, writes Jason Nissé

LNM, the steel group run by controversial Anglo-Indian businessman Lakshmi Mittal, has made a $560m (£350m) bid for Poland's largest steel-maker, Polskie Huty Stali (PHS).

However, Mr Mittal is facing tough competition from the American giant US Steel, while Luxembourg-based group Arcelor is taking a close interest.

The Polish government, which is privatising the troubled steel group, asked for binding offers to be put in last week. Only two bidders met the deadline, LNM and US Steel, but Arcelor said it wanted to be "involved in the restructuring of the Polish steel industry", so there is speculation that it may be allowed into the fray later on.

The Polish government has said it will choose a preferred bidder and enter into exclusive negotiations by the middle of next month. It is looking for any bidder to take on PHS's $410m of debts and invest at least $150m in the company. In exchange the buyer will get 75 per cent of the group, with the Polish state holding the remaining shares.

Mr Mittal said: "The growing strength of the Polish market, the technical expertise and skills of the PHS workforce, the possibility of consolidating the Polish steel industry and the impending integration of Poland into the European Union are just some of the reasons for the investment in PHS." His business empire, which has an annual turnover of more than £7bn, already has substantial operations in the Czech Republic and Romania.

The purchase of the Sidex steel complex in Romania by LNM subsidiary Ispat International caused great controversy after it emerged that the UK Ambassador in Bucharest lobbied on behalf of Ispat. Mr Mittal was revealed as a major donor to the Labour Party, raising questions about whether Tony Blair had brought pressure to bear on behalf of Ispat.

The PHS deal will be a political hot potato. The Polish government has been careful to show the European Union that it is not breaching state aid rules in trying to restructure its steel industry, while there will be competition issues to be addressed whichever bidder wins. Then there will be tough talking with the strong Polish trade unions about likely job cuts to turn the company around.

However, an LNM spokesman denied it had asked for the embassy in Warsaw to lobby on its behalf in the battle for PHS.

LHM is also believed to be interested in buying part of Corus, which last week appointed Philippe Varin from Pechiney as its new chief executive. M. Varin's arrival makes a break-up of the troubled Anglo-Dutch steel group far less likely.

Pittsburgh-based US Steel recently invested in a steel mill in Slovakia and is looking for cheap production to counterbalance its expensive plants in the US. "We bring a different value to Europe," said John Goodish of US Steel.