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Mittal starts campaign to explain Arcelor bid

A Mittal/Arcelor combined group would be three times the size of its nearest rival, Nippon Steel Corp.

india Updated: Jan 30, 2006 16:12 IST

Steel magnate Lakshmi Mittal met France's finance minister on Monday as he sought to woo politicians and workers for his $23 billion hostile bid for European steel maker Arcelor.

Arcelor, meanwhile, was drawing up its own charm offensive, having rejected Mittal's offer over the weekend.

European governments worry about the threat to jobs posed by the bid, while Arcelor said it was ready for a fight that could last at least four to six months.

Finance minister Thierry Breton said in an interview with financial newspaper Les Echos published before he met Mittal on Monday that the government had "the greatest reservations about this bid".

Les Echos said the bid was a clash of two concepts of a company and its relations with workers -- one of emerging economies with low wages and little social protection and the other of Europe with higher wage costs and levels of social protection.

Mittal has said he would honour Arcelor's social commitments.

A Mittal bid poses a sharp test for French Prime Minister Dominique de Villepin's policy of "economic patriotism", especially with unemployment likely to be a key issue in French presidential elections in 2007.

The impact of the bid was being felt across the world's steel industry and stock markets, with shares of major steel makers rising sharply in Asia on Monday as investors bet a bidding war could lift stock values across the sector.

Arcelor Chief Executive Guy Dolle, who described Mittal's offer as a "bit ridiculous", told France's Europe 1 radio station that a bid would be bad for all aspects of his company.

"It would be bad for shareholders and bad for employees," he said. "It is going to be a long battle, but we are solid. The battle has begun and we ought to win," he said.

"Arcelor does not need Mittal and we believe that the future of Arcelor is much better, for its shareholders and its employees, by being independent than by linking with Mittal," Dolle said.


Arcelor was created in 2002 by the merger of France's Usinor, Spain's Aceralia and Luxembourg's Arbed. Its French workforce of 28,500 makes up 30 percent of its staff.

At a board meeting over the weekend in Luxembourg, the company rejected Mittal's offer, which has also drawn the opposition of Europe's political establishment.

The conservative French government was widely reported to be embarrassed by the bid, and Breton said he would ask the steel magnate for more details at the meeting on Monday morning.

"I am very surprised by (Mittal's) way of proceeding," he told LCI television in an interview on Sunday.

Although it is not a French company, Arcelor's shares are traded in Paris and the unsolicited bid affects a vital industry.

Attempts to shield French companies from hostile foreign bids in sensitive sectors such as defence exclude steel.

The government wants to avoid allegations of protectionism even as it seeks to support French jobs.

Luxembourg's government also spoke out against the deal on Sunday, expressing its concern about how it would affect the state's 5.62 per cent stake in the company, arguably the jewel in the crown of the country's economy.


Mittal said on Friday it was offering 28.21 euros a share, a 27 per cent premium to Arcelor's closing price on Thursday.

Arcelor's shares jumped as much as 41 percent to a high of 31.29 euros before closing on Friday at a record 28.50 euros, up more than 28 per cent, on speculation Mittal would have to raise its bid. On Monday they traded 2.6 per cent higher.

Analysts at ABN AMRO said Mittal had the scope to raise his offer as high as 35 euros per Arcelor share, if it had to.

"To hit 35 euros, a level some market participants we have spoken to are hoping for, a meaningful counterproposal (tie-up with third party) would be a necessity," ABN AMRO said.

A Mittal/Arcelor combined group would be three times the size of its nearest rival, Nippon Steel Corp.

In Asian trade on Monday, Nippon Steel shares climbed 2.3 per cent, JFE Holdings Inc, the world's fourth largest steel firm, rose 6.2 per cent. Australia's top firm in the sector, BlueScope Steel Ltd, jumped 4.9 per cent.

First Published: Jan 30, 2006 16:12 IST