Ball in Arcelor's court after Mittal sweetens bid
It is not clear whether the Franco-Spanish-Luxembourg group will come to a definitive decision.india Updated: May 21, 2006 10:39 IST
The ball was in Arcelor's court on Sunday as the steel manufacturer's board prepared to respond to a sweetened 25.8 billion-euro ($32.9 billion) offer from rival Mittal Steel.
Arcelor's board of directors were due to meet in Luxembourg at 3:00 pm (1300 GMT) on Sunday to study the details of the improved offer made on Friday by Mittal, the biggest steelmaker worldwide in terms of volume.
But it is not clear whether the Franco-Spanish-Luxembourg group will come to a definitive decision. Arcelor "does not have all the official documents" laying out the new offer, a source close to the proposed deal said.
Even if it does issue a statement at the end of the day, it could be a few days before Arcelor's board gives its recommendations to shareholders.
For nearly four months, the group's board has been doing all it can to dissuade them from succumbing to Mittal's advances, and there is little chance that the improved offer will be enough to convince the directors to accept a tie-up.
"Arcelor still believes a coming together of the two companies is not a convincing proposal," a source close to the group said on Saturday.
Moreover, the leaders of the group have always insisted an all-cash offer is a pre-condition to talks with Mittal.
On Friday, Mittal raised its bid for Arcelor to 25.8 billion euros, or 37.74 euros a share, up from 18.6 billion euros, and said that if the bid succeeded the family would hold about 45.0 per cent of the new entity -- a smaller proportion than previously envisaged.
The world's biggest steel company announced the move just a day after its initial takeover bid became official. The earlier bid was announced at the end of January and rejected by Arcelor.
Indian businessman Lakshmi Mittal on Friday declared his "absolute determination" to secure a deal to buy Arcelor. The revised offer is aimed both at answering the criticisms of shareholders, who judged the earlier offer too low, and at assuaging the concerns of France, Luxembourg and Spain about the flagship of Europe's steel industry falling into foreign hands.
Friday's announcement also increased the cash element of the offer, from 25 per cent to 29.4 per cent of the total, with the remainder in shares.
Many shareholders have balked at the idea of accepting shares in a company that is still not well known, and whose management structure is considered opaque.
Under the revised terms, Arcelor shareholders would be able to choose between accepting Mittal shares or cash, up to an overall limit of 7.6 billion euros, or a combination of the two.
Arcelor responded to the original bid by saying it would increase its 2005 dividend from 1.2 euros a share to 1.85 euros. Mittal has built its takeover bid on a proposed dividend of 0.8 euros.
Arcelor also said it would return at least five billion euros to its shareholders via a massive share buy-back representing 25 per cent of its capital. Analysts value the group at between 25 billion euros and 30 billion euros.
"Yes, the offer has been improved, but Arcelor will determine whether, for its shareholders, it comes close to the value of the group," said a source close to the proposed deal. "At the moment, Mittal is at the bottom end."