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Mittal boosts Arcelor bid to $33 billion

Arcelor said it would comment on the offer only after the board meeting.

india Updated: May 20, 2006 11:14 IST

Mittal Steel, the world's largest steel group by production volume, raised its hostile offer for rival steelmaker Arcelor by a third in value to 25.8 billion euros ($33 billion) on Friday.

Just a day after formally launching its bid, Mittal Steel said it was prepared to offer 57 per cent more cash and allow the Mittal family's stake in the combined business to fall below 50 per cent -- addressing two sticking points in its earlier bid.

Arcelor, the world's biggest steel company by sales revenue, said it would not comment on the new offer before it had held a board meeting in coming days.

Dutch-registered Mittal, 87 per cent owned by the family of Lakshmi Mittal, the world's fifth-richest man according to Forbes magazine, is aiming to create a 100 million tonne producer, more than three times the size of its closest rival.

But its ambitions have been fiercely resisted by Luxembourg-based Arcelor, and have also sparked a political storm, with some European politicians fearing job losses.

Mittal Steel said in a statement that it was now offering a choice between one new share and 11.10 euros in cash for each Arcelor share, 17 Mittal Steel shares for every 12 Arcelor shares, or 37.74 euros in cash for each Arcelor share.

Previously, the main offer from Mittal Steel was 0.8 Mittal Steel shares and 7.05 euros per Arcelor share.

At 1005 GMT, Arcelor shares were up 12.3 per cent at 35.92 euros, having returned from suspension, and Mittal Steel shares in Amsterdam were down 2.8 per cent at 26.79 euros.

Using these prices, Mittal Steel's offer is worth about 24.4 billion euros, before taking into account Arcelor's outstanding convertible bonds.

Mittal Steel said the maximum amount of cash it was offering was now 7.6 billion euros, up 57 per cent from its previous bid.

The new terms mean the Mittal family's shareholding in the enlarged company would fall to 45 per cent.

"Not only are we offering a very significant increase in the cash component, but also a greater participation in the combined company," Chairman and Chief Executive Lakshmi Mittal said.

"The revision reflects our long-term confidence in the health and prospects of the steel industry, in which the Arcelor/Mittal combination would be the undisputed sector leader," he said.

Gerard Augustin-Normand, head of fund management firm Richelieu Finance, said: "It is a serious offer and Arcelor, if it is going to reject it, will have to make clear why. Mittal now has a serious chance of winning but much depends on the evolution of the Mittal share price,"

Shares in other steel groups were buoyed by the prospect of a higher bid, with Corus up 4.7 per cent and ThyssenKrupp up 1.7 per cent.

Global giant

If successful, Mittal Steel would become a global giant worth around $40 billion, employing 320,000 people and producing about 10 per cent of the world's steel.

Mittal Steel first announced its offer for Arcelor on Jan 27 but had to wait for regulatory clearance for the bid from watchdogs in Belgium, France and Luxembourg before posting its offer document this week.

The offer is open until June 29. Regulators have said the result would be announced on July 13.

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 win their support.

Arcelor has also ring-fenced its Canadian unit Dofasco, which it bought earlier this year, inside a Dutch foundation.

The move would prevent any predator from selling it for five years. Mittal had planned to sell the unit to Thyssenkrupp, which lost a battle for the unit last year to Arcelor.

Mittal Steel has spearheaded the drive to consolidate the industry, where the top 10 players have a combined global market share of only about 30 per cent.

Arcelor was created from the 2002 merger of steel groups from Luxembourg, France and Spain. The governments of those countries originally opposed Mittal's plan when it was announced in January, but they have since softened their opposition.

Mittal Steel said on Friday the revised offer was "subject to adjustments, including with respect to Arcelor's announced dividend".

First Published: May 19, 2006 15:29 IST