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Arcelor bows down to rebels

Shareholders secured a vote, which could jeopardise Arcelor's Severstal plans while boosting Mittal's bid.

india Updated: Jun 12, 2006 14:54 IST

Rebel shareholders in steelmaker Arcelor secured a special vote on Monday which could jeopardise the firm's plans to merge with Russia's Severstal and boost a rival takeover bid by Mittal Steel.

Arcelor will allow its management to meet with Mittal about its bid, which it may raise, the Luxembourg-based firm said after its board of directors met on Sunday and formally rejected Mittal's current bid.

If rebel shareholders do not drum up the support of 50 per cent of Arcelor's capital to vote against the Severstal deal on June 30, they will be asked to vote on a resolution that calls for a special shareholders meeting which will not take place before mid August.

If that resolution is passed, two-thirds of the represented Arcelor shareholders will need to vote in favour of the tie-up for the deal to go through.

Arcelor's board said it was concerned that this resolution, if passed, would give Mittal a decisive advantage due to timetable technicalities. Mittal's offer is due to close on July 5 and it is yet unclear whether billionaire Lakshmi Mittal would keep a minority stake in Arcelor if he fails to get over 50 percent.

If Mittal did keep a minority stake, he could use it to vote at a special shareholders meeting, making it likely that the Russian white knight deal would be killed, Arcelor said.

Goldman Sachs, the investment bank advising Mittal Steel, has helped shareholders with about 30 percent of Arcelor's capital to call for this special meeting to change the voting requirements of the Severstal deal.

But some investors backing the call for a special shareholders meeting may technically not be entitled to make such a request due to rules on share registration and ownership.

Arcelor board said on Monday that it would look at the matter closely.

A call to hold a special shareholders meeting must be backed by at least of 20 per cent of Arcelor's capital.

Arcelor's management favours the Severstal deal as a white knight that will ward off Mittal's bid -- which would combine the top two steel makers in the world.

But shareholders appear to be impatient with the months-long saga and some have called for talks with Mittal, while others said they would legally challenge the Severstal deal.

Arcelor said last week its representatives would meet then with Mittal, but this is the first time the company has mentioned management getting involved in a meeting with its rival.

"Having noted that Mittal Steel recently indicated that it was prepared to further improve its offer in the context of a recommended transaction, the Arcelor Board has mandated the Group Management Board to meet with Mittal Steel," Arcelor said.

The meeting would "explore such possible improvements" to Mittal' bid.

Arcelor also said it had set its buy-back scheme price at 44 euros per share.

"Following its prior decision to distribute a 6.5 billion euro amount to Arcelor shareholders, the Arcelor Board of Directors has decided that the price per share to be offered ... shall be 44 euros per share," it said in the statement.

First Published: Jun 12, 2006 10:30 IST