Mittal shares for seven Arcelor shares, or an exchange ratio of 1.143, for the 6 percent of Arcelor it did not already own.
Arcelor stock plunged 13.3 per cent to €51.41 by 1220 GMT. Arcelor Mittal shares were off 0.5 percent at €42.32.
Mittal Steel last year won over its Luxembourg-based rival Arcelor after a bitter takeover battle, offering 11 of its own shares for seven of Arcelor, a ratio of 1.571.
Tim Gittos, a merger arbitrage analyst for broker Aurel Leven, said he had no doubt minority shareholders would challenge the new exchange ratio in court.
"The exchange ratio is so bad that they are in an enormous battle, which will delay the merger process," he told Reuters.
Arcelor Mittal said it aimed to complete the merger in the course of 2007 even if the merger was challenged. Its previous timetable had indicated the end of summer for finalisation.
"I think that one cannot let such an exchange ratio go without reacting ... It is obvious we will study a legal challenge," Colette Neuville, head of minority shareholder association ADAM, told Reuters on Wednesday.
ADAM, which played an active role in the takeover battle last year, has been mandated to represent a number of minority shareholders on the issue.
"I can tell you that the board of directors approved unanimously the (exchange ratio) decision. It is both fair for Arcelor and Arcelor Mittal," chairman Joseph Kinsch told a media conference call.
The company also reported a first-quarter core profit of $4.3 billion on Wednesday, slightly above its financial guidance of $4 billion to $4.2 billion, but in line with analysts' forecasts.
Arcelor Mittal, which accounts for roughly 10 percent of world steel production, said sales reached $24.476 billion, up 17 percent from a pro forma figure for the first three months of 2006.
The steelmaker said it expected its EBITDA in the second quarter to be higher than in the first as synergies in marketing, sales and manufacturing continued to come through.
"Synergies are being realised faster than expected, with an annualised run-rate achieved at end March of $573 million, versus a target of $500 million," Exane BNP Paribas analyst Vincent Lepine said.
Underlying demand for steel remained strong in most regions, management said during the conference call, explaining that it should keep prices firm.
"Overall we are counting on a very positive environment for our business," marketing head Roland Junck said.
Arcelor Mittal's deep pockets and its commitment to consolidate the steel industry have prompted continued merger speculation involving takeover targets such as Korea's Hyundai Steel Co or AK Steel of the United States.
Chief Financial Officer Aditya Mittal declined to comment specifically on these rumours but said the company would continue to scan the market for acquisition opportunities.
Arcelor Mittal did say it would announce the results of its planned divestment of US plant Sparrow Points in six to eight weeks. The divestment was required by regulators as a condition for Mittal Steel's takeover of Arcelor. (Additional reporting by Michael Shields in Frankfurt).