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Arcelor faces possible investor revolt

Rebel shareholders hold enough votes to to call for a shareholder meeting over the controversial deal.

india Updated: Jun 01, 2006 11:30 IST

Arcelor, the Luxembourg-based steel maker which is seeking to fend off an unsolicited bid from rival Mittal Steel, is facing a potential shareholder revolt over its tie-up with Russia's Severstal, its would-be white knight.

Mittal Steel said late on Wednesday that rebel shareholders of its takeover prey held enough votes to go ahead with their plan to call for a shareholder meeting over the controversial deal.

"We understand that approximately 30 per cent of Arcelor shareholders have already supported a vote on the Severstal deal and we welcome this initiative," a Mittal spokesman said.

Last week Arcelor unveiled its plan to buy the Russian steel firm, which analysts see as a tactic to fend off its unwanted suitor.

The 13 billion euro deal would involve Severstal's chief Alexei Mordashov taking 32.8 per cent of an expanded Arcelor.

The deal sparked controversy from Arcelor investors since shareholders representing over 50 per cent of Arcelor's capital are needed to reject the deal, a figure that seems barely reachable given that less than half of investors attend Arcelor's general meetings, critics said.

The meeting would propose that votes be counted according to the capital represented at the meeting, rather than all shares existing.

People close to Mittal Steel said that according to the Luxembourg legislation, Arcelor must hold an Extraordinary General Meeting within 30 days.

Arcelor, which previously said it planned to hold a shareholder meeting to vote on the Severstal acquisition on June 28 declined to comment.

Goldman Sachs, which advises Mittal on its Arcelor bid, coordinated the shareholders' effort to mobilise investors but Mittal said the potential shareholder revolt was not its initiative.

Separately a number of shareholders groups said they were considering legal action against the Arcelor-Severstal tie-up in order to get a public offer from Mordashov for the whole of Arcelor or a standard merger procedure, which would need over 66 percent of investors present at a shareholder meeting to back the deal.

Market regulators in Belgium and Luxembourg said on Wednesday they had approved Mittal's raised 23.5 billion euro ($30.25 billion) offer for its rival while regulators in France and Spain were expected to give their clearance shortly.

The Luxembourg regulator said the offer period would be extended until July 5 from a previous date of June 29 and would close at the same date in other markets where Arcelor is listed.