Mittal, Arcelor scrap over earnings

Mittal says he is open to talks with Arcelor on industrial plans, strategy and senior management jobs.

Mittal Steel stepped up pressure on Arcelor on Wednesday by claiming its $23 billion bid had been well received by its rival's shareholders, but Arcelor said its investors stood firm and rebuffed an offer for talks.

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Top global steel maker Mittal reiterated it was not ready to raise its unsolicited cash-and-shares bid for Luxembourg-based Arcelor, the world's second largest, as the duel between them spread to their financial results.

Mittal Steel posted fourth-quarter earnings that beat expectations and delivered an upbeat outlook for the industry -- a day ahead of the publication of Arcelor's own results.

Arcelor signalled it was unwilling to announce evasive action before seeing the contents of Mittal's bid, putting the focus on annual profits seen up by 20 per cent on Thursday.

Mittal Steel's bid for its closest rival would create a steel giant with a global market share of about 10 per cent.

It has been rejected by Arcelor and triggered a political backlash in Luxembourg, where Arcelor is based, and in France, where it employs 28,500 people in a country with unemployment of 9.5 percent and a government that has launched a drive for "economic patriotism."

"The investor reaction has been overwhelmingly positive," Mittal Steel Chief Executive Lakshmi Mittal, 88-percent owner of the company, told a news conference. "We remain confident that we will be able to convince all the stakeholders that this transaction represents a substantial opportunity."

Asked if he would consider hiking the bid, the Indian-born billionaire and world's third-richest man said: "No."

Mittal said it was open to talks with Arcelor on industrial plans, strategy and senior management jobs.

But in a newspaper interview ahead of his own results presentation, Arcelor Chief Executive Guy Dolle rejected the offer and said there would be no point in talking as long as Mittal was offering "second rate" paper instead of cash.

Arcelor's board would have a duty to consider a bid composed entirely of cash, instead of one quarter cash and three quarters Mittal stock, Dolle told French daily Le Figaro in the interview, released ahead of its Thursday edition.

DIVIDEND HIKE

Mittal Steel posted fourth-quarter 2005 earnings per share of 92 cents against a Reuters Estimates forecast of 75.7 cents.

Arcelor is seen reporting a profit jump of more than 20 per cent for 2005 and hopes to draw publicity towards what so far remains a defence based on the value of its stock, backed up by rhetoric about the lack of investment in Mittal plants.

It plans to propose a substantial 2005 dividend increase in a bid to keep shareholders on its side, a source familiar with the situation told Reuters. Arcelor has however said it does not plan to resort to an exceptional dividend to ward off Mittal.

In London on Wednesday, Mittal painted a bright outlook for the industry, saying production growth in China, which has put pressure on steel prices, was starting to slow.

"In 2006, we expect prices to stabilise in the first half, with an expected strengthening of prices in the second half."

Mittal Steel -- which expects synergies of $1 billion as a result of an Arcelor takeover -- said consolidation would help to bring stability to the steel industry.

The industry's fragmented structure has encouraged a rapid escalation of production during boom periods, but left steelmakers vulnerable in lean times, forcing sharp price cuts.

Finance Director Aditya Mittal, son of the family-controlled company's founder, said he had met shareholders controlling 30-40 per cent of Arcelor and called the response "positive."

But Dolle told Le Figaro, "Nobody has told me 'I want to sell my Arcelor shares to Mittal Steel'."

He said Arcelor would only outline its defence when Mittal formally makes an offer. Dolle has already ruled out a white knight but said plans for partnerships "could be accelerated."

Analysts have said they favour a tie-up but Mittal Steel might need to sweeten its bid.

Petercam's Leroy, who is considering selling his stake in Arcelor and buying Mittal shares, said Arcelor's numbers on Thursday might not be enough to sway investors.

"The numbers tomorrow are very important, but perhaps they are now only the second most important item after the bid."

Mittal Steel shares closed down 1.73 per cent at 28.42 euros. Arcelor shares closed down 1.1 per cent at 29.79 euros, exactly in line with the current offer value.

A vocal opponent of the bid to buy Luxembourg's biggest private employer, the Grand Duchy said on Wednesday that India had threatened not to ratify a taxation accord with it, but did not say whether this was linked to its opposition. An Indian diplomat in Brussels denied his country had made any threat.

France, which has also criticised the proposed deal, sought to smooth relations with India by ordering back to its own waters an asbestos-laden warship bound for an Indian scrapyard, days before a trip to India by French President Jacques Chirac.

Lakshmi Mittal, who has said a tie-up with Arcelor could safeguard European jobs against mounting Chinese competition, welcomed signs that political opposition might be waning.

"That means the process is now becoming more business-like and is a very positive sign," he told reporters.