Mittal Steel, which has been seeking to buy Arcelor for almost five months, needs to increase its offer a second time to convince the Luxembourg-based steelmaker's board to recommend it, ING Groep said.
Mittal has to "sweeten its offer for Arcelor and further improve its corporate governance," Alain William, an ING analyst in Paris, said in a report.
To repel Rotterdam-based Mittal, Arcelor is asking shareholders to accept a combination with OAO Severstal, the Russian steelmaker owned by billionaire Alexei Mordashov. Arcelor's board will meet for the second time in five days this weekend to contemplate the two offers.
Mittal is offering a share and 10.05 euros in cash for every Arcelor share under its current offer. That values Arcelor at 23.9 billion euros (30.2 billion dollar), or 36.08 euros a share, based on Mittal's closing stock price in Amsterdam on Wednesday. The offer closes on July 5.
Shares of Arcelor remained suspended on Thursday at the request of regulators, after falling 38 cents, or 1.1 per cent, to 35.02 euros in Paris on Wednesday. Mittal's shares rose 96 cents, or 3.7 per cent, to 26.99 euros in Amsterdam on Thursday.
Mittal raised its offer for Arcelor by 34 per cent on May 19, after making a first bid on January 27. As part of the improved terms, billionaire Chairman Lakshmi Mittal agreed to eliminate his preferential voting rights in the combined company.
Citigroup, HSBC Holdings, Goldman Sachs Group, Credit Suisse Group and Societe Generale are advising Mittal. Arcelor's advisers include BNP Paribas, Calyon, Deutsche Bank, JPMorgan Chase, Merrill Lynch, Morgan Stanley and UBS. Severstal is being advised by ABN Amro Holding and Lehman Brothers.