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Mittal makes $23.2 bn bid for Arcelor

Mittal's 18 bn euro in cash and shares offer for Arcelor is open until June 29.

india Updated: May 18, 2006 14:36 IST

Mittal Steel launched its hostile takeover offer for rival Arcelor on Thursday, giving Arcelor 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, is offering about 18 billion euros ($23.2 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.

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

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.

Arcelor 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.

Lakshmi Mittal said in a statement that he was pleased the offer was now being put to Arcelor's shareholders.

"We continue to believe that our offer is a very attractive one, structured to enable Arcelor shareholders to participate in the exciting growth potential of the combined company, whilst also receiving a generous cash element," he said.

Reshape industry

Under Mittal's offer, Arcelor shareholders receive 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.

Mittal has said it might be willing to raise its offer "marginally", although Thursday's news release made no mention of improved terms. The current offer is about 10 per cent below the price of Arcelor's shares in the market.

Mittal shares were down 4 per cent at 26.84 euros on Thursday, while Arcelor was down 3.2 per cent at 31.80 euros.

The Mittal family, headed by Indian-born, London-based Lakshmi Mittal, 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.

First Published: May 18, 2006 13:51 IST