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Mittal wants Europe to face up to China

France in particular has voiced criticism about the merger plans as part of its new government policy of "economic patriotism".

india Updated: Feb 11, 2006 13:20 IST

Lakshmi Mittal, the Indian-born metals billionaire, said in a newspaper interview published on Friday his company's bid for steel group Arcelor would safeguard European jobs in the face of mounting Chinese competition.

European regulators are poring over the draft prospectus of the unsolicited Mittal Steel offer unveiled two weeks ago for Arcelor.

The number one and two global steel groups are feverishly fleshing out their plans as the takeover battle heats up.

Lakshmi Mittal, founder, chairman and majority-owner of the steel group bearing his name, told Brussels weekly European Voice that he aimed to create a European champion by welding Rotterdam-based Mittal and Luxembourg-based Arcelor together.

"If we do not have a large European company, we will not be able to stand against producers (and) exporters such as China," Mittal was quoted as saying.

"What do you want out of this economic patriotism? A strong European company, a strong European champion. This is the merger of two European companies: no job cuts, better future, better product, more investment," he said.

France in particular has voiced criticism about the merger plans as part of its new government policy of "economic patriotism", but politicians have toned down the rhetoric.

Financial and official sources said, however, that the French government was considering putting forward a plan whereby Arcelor would buy partially state-controlled minerals group Eramet to expand beyond the reach of Mittal.

Eramet shares shot up on a report about the possibility and set an all-time high at 103.70 euros before slipping back to 99.10 euros, still up 4.6 per cent.

The Finance Ministry and Arcelor, the world's second biggest steel maker, declined to comment on what they called "a rumour".

A senior EU official said the Commission was in favour of European champions to participate in a global consolidation, but its hands are tied. "We cannot create global players, it has to be the result of the market," the official said.

Shares in the firms have dropped recently and the share-and-cash offer by Mittal now values Arcelor at 18.9 billion euro ($22.5 billion) versus over 20 billion 2 weeks ago.

Tiny spread shows no clear winner yet

The bid value is currently some 0.3 per cent above the Arcelor share price, indicating that the market takes the offer seriously but has not declared a winner or loser yet.

Mittal has added Societe Generale to its team of bank advisers, where it joins Citigroup, Credit Suisse, Goldman Sachs and HSBC.

Banking sources said Mittal was enlisting help of industry consultants to elaborate the business plan of the merger as the governments of France, Spain, Belgium and Luxembourg have complained about what they say is a lack of detail.

The Belgian government has hired Lazard Freres to advise it.

The Arcelor team, meanwhile, is studying defences which could include a tie-up with another firm, sources said.

The French company will next week announce results, during which it will play up its independent growth prospects and pay a higher dividend as it seeks to win over its shareholders, said sources familiar with the situation on Friday.

Its chief executive, Guy Dolle, has ruled out the possibility that Japanese ally Nippon Steel would ride to the rescue as a white-knight, but he is trying to muster sufficient investor support to stave off the bid and even suggested he could seek several smaller white-knights.

Arcelor is also working hard to finalise a deal to obtain a large stake in China's Laiwu mill which would allow it to show to investors they do not need to accept Mittal's offer to get more exposure to the booming Chinese economy.

Colette Neuville, head of French minority shareholders association ADAM, called on both companies to pay for independent research into the fair value for the bid.

Luxembourgers, whose history is intertwined with the steel industry, are dead set against the bid, according to a poll on Thursday by broadcaster RTL. Nearly 70 per cent were not in favour of the bid and even more of them saw it as a bad thing for the Grand Duchy.

First Published: Feb 10, 2006 14:40 IST