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Mittal Steel set to raise bid for Arcelor: Sources

Mittal Steel's bankers were mulling options to increase the company's hostile 18 bn euro bid for Arcelor by 3 bn euros.

india Updated: May 20, 2006 15:51 IST

Mittal Steel is set to raise its hostile bid for rival steelmaker Arcelor, sources familiar with the situation said on Friday after trading in both companies' shares was suspended.

Overnight, the Financial Times newspaper said, without citing sources, that Mittal Steel's bankers were mulling options to increase the company's hostile 18 billion euro bid for Arcelor by 3 billion euros ($3.8 billion).

Neither Mittal Steel nor Arcelor would comment on the report nor on the reason for the share suspensions.

Euronext said the shares were suspended pending a statement.

The FT said chairman Lakshmi Mittal has conceded privately he will almost certainly have to increase his bid substantially if he is to win the battle for Arcelor.

On Thursday, Mittal Steel, the world's largest steel group by volume of production, formally launched the cash and shares bid for Arcelor, the world's biggest steel company by sales revenue.

Mittal Steel has said previously it might raise its bid marginally if it were to be recommended by Arcelor's board.

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

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

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

"The offer will not make it in its current form," an analyst who declined to be named said on Thursday, adding Arcelor stock was being supported by the company's planned share buyback.

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. Mittal had planned to sell the unit to Thyssenkrupp, which lost a stock market 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 percent.

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.

First Published: May 19, 2006 15:27 IST