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Mittal set to launch Arcelor bid

If successful, Mittal will create a global giant worth around $40 billion, employing 320,000 people.

india Updated: May 18, 2006 12:37 IST

Mittal Steel was set to launch its hostile takeover offer for rival Arcelor on Thursday, giving the latter's shareholders the chance to determine its future after a months-long war of words between the steelmakers.

Mittal, the world's largest steel group by volume, will offer some 19 billion euros ($24.5 billion) of cash and its own shares for Arcelor, the world's biggest by sales, having received regulatory clearance for the bid from watchdogs in Belgium, France and Luxembourg earlier this week.

If successful, Rotterdam-based Mittal, controlled by billionaire Chief Executive Lakshmi Mittal, will create a global giant worth around $40 billion, employing 320,000 people and producing around 10 per cent of the world's steel.

Arcelor has urged shareholders to preserve the company's independence and has already promised an increased 2005 dividend and a 5 billion euro share buyback at a price above the market level in a bid to convince them to reject the bid.

It has also ring-fenced Canadian unit Dofasco, which it bought earlier this year, inside a Dutch foundation. The move would prevent any predator from selling it.

Mittal had a deal to sell the unit to Thyssenkrupp, which lost a stock market battle for the unit last year to Arcelor.

Under Mittal's offer, Arcelor shareholders will get four Mittal Steel shares and 35.25 euros for every five Arcelor shares. The maximum amount of cash paid would be 25 per cent of the offer value, Mittal has said.

The Mittal family, headed by Indian-born Lakshmi, the world's fifth richest man according to Forbes magazine, would have a 51 per cent stake in the combined business, which Mittal believes would create about $1 billion in synergy savings.

Analysts say the offer has the potential to reshape a fragmented industry which has tended to suffer from overcapacity during economic downturns, and steel shares across the world have risen on hopes of more deals.

Mittal Steel has spearheaded the drive to consolidate an industry where the top 10 players still have a combined global market share of only about 30 per cent. Last year the firm completed the $4.5-billion purchase of US International Steel Group.

Luxembourg-based Arcelor was created from the 2002 merger of Luxembourg, French and Spanish steel groups. Governments of those countries originally opposed the proposed Mittal offer when it was announced in January.

A series of planned European cross-border mergers unveiled at the time sparked fears of job cuts, although the governments have since softened their stances.

However, only Belgium, which also has Arcelor plants, officially has a neutral stance towards the bid.