/ 26 June 2006

Mittal, Arcelor to forge new steel giant

The world’s two biggest steelmakers — Mittal Steel and Arcelor — agreed on Sunday on a deal that forges a new force in the global steel business, industry sources said.

This follows a marathon meeting of Arcelor’s 18-head board on Sunday with Indian-born Lakshmi Mittal’s group forced to raise its takeover price to secure Arcelor’s backing for its bid. It is the second time since Mittal launched his takeover moves in January that he has had to top up his bid.

A corporate marriage between the world’s two biggest steelmakers will create a new global steel giant with control of about 10% of the world’s steel production and combined turnover of about €56-billion.

The new Arcelor-Mittal group, which is to be based in Luxembourg, will have a staff of more than 320 000 and have annual production three times that of its closest rival.

After increasing his bid by 34% last month to €37,74 per share or a total of €25,8-billion, it was not clear how much more Mittal has been forced to pay to win Arcelor. Arcelor has said it would not consider any offers under €40.

The moves to team up with Mittal represents a dramatic U-turn for Arcelor, which has fought hard to thwart Mittal’s takeover manoeuvres culminating in a €13 billion plan unveiled last month to merge with Russian steel czar Alexei Mordashov’s Severstal group.

But angered by the degree of control Severstal would have of the new merged group, the proposal sparked a rebellion among Arcelor shareholders that in the end helped to force the Luxembourg-based group to open the door to negotiations with Mittal.

Indeed, as the rebellion took shape, Arcelor was forced to cancel another stockholders’ meeting set down for last week which has been called to consider a management €6,5-billion share-buy plan.

This had also been drawn up as part of Arcelor’s defence strategy to head off Mittal’s hostile bid.

Arcelor’s Sunday board meeting, which had been called to decide on whether to team up Mordashov or Mittal, represented the second time in five days the board has tried to find a solution to the often rancorous takeover battle.

The deal between Mittal and Arcelor also raises the possibility of Arcelor being forced to pay Severstal a form of compensation for exiting the merger deal that it had planned with the Russian group.

Mittal has already gained approval from the European Commission’s monopoly authorities for his takeover plans.

Trading in Arcelor’s shares, which were suspended on bourses in France, Spain, Luxembourg and Belgium on Wednesday as the takeover contest heated up, is expected to resume on Monday. – Sapa-DPA