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Mittal bids $22.8 bn Arcelor

UK-based Mittal announced an euro 18.6 billion ($22.8 billion) offer for his nearest rival firm Arcelor.

india Updated: Jan 28, 2006 16:24 IST

Mittal Steel, the world's largest steel maker, announced an euro 18.6 billion ($22.8 billion) offer on Friday for its nearest rival Arcelor SA.

London-based Mittal said that the deal, which values Arcelor shares at euro 28.21 ($24.50) each, would create the world's first 100 million ton-plus steel producer with a market capitalization of $40 billion (euro 32.7 billion). It anticipated annual synergies of $1 billion (euro 816 million).

While the bid for Arcelor caught the market by surprise, Mittal has been openly looking for acquisitions to increase its share of the global steel-making capacity as demand from China and India rises.

Mittal Chief Executive and Chairman Lakshmi Mittal said that both companies have been at the forefront of consolidation of the steel industry and "share a similar vision for the future of our industry."

"This combination accelerates this process and leaves us uniquely positioned to benefit from the opportunities created," he added.

Arcelor spokesman Jean Lasar in Luxembourg offered no comment on the bid, adding that the company might react later in the day after assessing the bid.

Mittal Steel added that, if the deal goes ahead, it has agreed to sell Canadian steelmaker Dofasco Inc -- which earlier this month agreed to a takeover by Arcelor -- to German-based steelmaker ThyssenKrupp AG.

Arcelor and Dofasco agreed to a euro 3.95 billion ($4.85 billion) takeover on January 24 after ThyssenKrupp dropped out of the bidding war.

ThyssenKrupp noted on Friday that Mittal is offering around 68 Canadian dollars (euro 48; $59) a share, equal to the final offer the German company made to Dofasco's shareholders before exiting the race.

ThyssenKrupp shares leapt on news of the proposed deal. They were up 7.7 per cent on the Frankfurt exchange to euro 21.88 ($26.80). Shares in both Mittal and Arcelor had been suspended on Friday pending an announcement. Euronext said that Arcelor shares would resume trading at 12 pm.

Mittal overtook Arcelor as the world's largest steelmaker by buying US-based International Steel Group, snapping up steel mills in eastern Europe and paying about $4.8 billion (euro 4.1 billion) in October to acquire Ukraine's state-owned Kryvorizhstal. Mittal, which is 88 per cent owned by the Mittal family, has also signed a memorandum of understanding with local authorities in India to set up a 12 million ton greenfield site in Jharkland. Arcelor, created in 2002 through the merger of Usinor SA of France, Arbed SA of Luxembourg and Aceralia Corp Siderurgica SA of Spain, makes around two-thirds of its sales to high-end European automotive and packaging companies, which means its profit margins are high.

However, late last year it moved into Latin America, taking control of Brazilian stainless steel producer Acesita SA after it bought out two Brazilian pension funds.

Under the terms of Friday's offer, Arcelor shareholders will receive four Mittal Steel shares and euro 35.25 ($30.61) cash for every five Arcelor shares.

First Published: Jan 28, 2006 10:50 IST