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Mittal Steel bids for Arcelor

Mittal Steel launched a hostile 18.6-billion-euro takeover bid for European group Arcelor.

india Updated: Jan 28, 2006 18:57 IST

Mittal Steel on Friday sought to consolidate its dominant position as the world's biggest steel producer by launching a hostile 18.6-billion-euro (22.7-billion-dollar) takeover bid for European group Arcelor.

The steel sector, long in the doldrums amid restructuring, is currently benefiting from a price boom driven by global economic growth and by expansion in India and China.

Mittal Steel, of Indian origins and now the leading steel group by production volume, said its cash-and-shares bid for Arcelor, the second biggest global steel producer, was based on an offer of 28.21 euros per share.

Mittal boss Lakshmi Mittal said he would like to hold "friendly discussions" with Arcelor but the Luxembourg-based steelmaker quickly replied that it saw the takeover bid as hostile.

The Arcelor board is to meet Sunday in Luxembourg to discuss the move by Mittal, which stunned the Grand Duchy where Arcelor is the largest employer and the state a stake-holder.

"The government is going to wait for the board of directors to take a position on Sunday afternoon before setting out its position," Luxembourg Economy Minister Jeannot Krecke told a news conference.

"We have a strategy and several options remain open," he said without elaborating.

The minister said he had stressed that Arcelor was a "strategic interest" for Luxembourg during "positive" telephone conversations Friday with Lakshmi Mittal, who is to meet Tuesday morning in Luxembourg with Prime Minister Jean-Claude Juncker.

Analysts said Mittal's approach, which also affects Dofasco of Canada and ThyssenKrupp of Germany, could spark a bidding war for Arcelor and put other steel groups under the takeover spotlight.

One analyst said the bid faced a number of hurdles, including scrutiny by competition authorities.

Arcelor's shares shot up 28.44 percent to close at 28.54 euros in Paris while in Amsterdam Mittal ended on a gain of 6.15 percent at 27.63 euros.

Mittal Steel, which is also listed on the New York stock exchange, said the terms represented a 27-percent premium over Arcelor's closing share price on Thursday.

Mittal has steel-making facilities in 14 countries and employs 175,000 people around the world.

It said the combined group would form a business producing about 115.0 million metric tonnes of steel per year, accounting for 10.0 percent of the global steel market, and would have total sales of more than 69 billion dollars (56.7 billion euros).

Its global workforce would come to 320,000 people.

The company's website said Mittal had shipments of 42.1 million tons of steel and had revenues of over 22 billion dollars in 2004.

A stock market analyst with Barclays Stockbrokers in London, Hilary Cook, cautioned there was no guarantee that the Mittal bid would succeed.

"This is an unsolicited bid from Mittal and there is probably some bargaining still to go with the chance of others entering the fray," she said.

"Other people in the industry will be looking at this. They are not going to let Mittal have Arcelor on the cheap. But whatever happens with Arcelor, this will not be the end of consolidation."

Competition authorities were highly likely to investigate the offer, she added.

European Union Competition Commissioner Neelie Kroes said that the bid would be thoroughly studied for a potential dominant market position by the bloc's authorities.

"It's interesting, and it will certainly get a lot of attention" from the competition commission, Kroes told reporters on the sidelines of the World Economic Forum in Davos, Switzerland.

Arcelor groups steel interests in Luxembourg, France and Spain. The state of Luxembourg owns 5.6 percent of the company, and 85.7 percent is in the hands of diversified shareholders.

While it is not French-only enterprise, French Economy and Finance Minister Thierry Breton nonetheless said his government was "concerned" and was following developments "with the greatest attention" because of its "implications for European and French industry and for employment."

Mittal Steel, which has risen from modest beginnings in India 30 years ago, said it had also agreed to sell leading Canadian steel-maker Dofasco, in the process of being acquired by Arcelor, to German producer ThyssenKrupp if it succeeded in acquiring Arcelor.

It said it would sell Dofasco to ThyssenKrupp at a price of 68.0 Canadian dollars per share. Arcelor has agreed to make a friendly bid for Dofasco at 71.0 Canadian dollars per share, valuing it at 3.95 billion euros (4.84 billion US dollars).

The announcement by Mittal Steel came only three days after Arcelor had agreed to buy Dofasco and four days after ThyssenKrupp had withdrawn its attempts to acquire the Canadian company.

First Published: Jan 28, 2006 18:57 IST