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Poison pills, dirt digging to prevent Mittal bid

The Govt of Luxembourg is to rush through a bill on takeovers which could protect Arcelor from the #12.7 bid made by Mittal Steel.

india Updated: Feb 13, 2006 19:11 IST
Vijay Dutt
Vijay Dutt

The blatant hostility shown by the French and Luxembourg governments to the Arcelor bid by Lakshmi Mittal has exposed the double standards of the European Union which has been repeatedly claiming to be keen to have closer political and trade relations with India.

In the latest twist of their opposition, the Grand Duchy, the Government of Luxembourg is to rush through a bill on takeovers which could protect Arcelor from the £12.7 bid made by Mittal Steel in the end of January.

Luc Frieden, Luxembourg Finance Minister, was quoted saying the bill adopted an amended version of a EU take-over directive that would allow a besieged company's board to repel a hostile takeover without seeking prior consent from a general assembly.

But Freiden was also at pains to stress that the bill was neither anti-Mittal nor pro-Arcelor rule. The Luxembourg Prime Minister was however candid enough to say he was totally opposed to the Mittal bid.

The new law raises the possibility of Areclor creating a poison pill to deter Mittal Steel by issuing new shares or making a bid of its own for another company, said a media business analyst. A Mittal Steel executive was reported saying, "This will mean that they could take drastic measures without consulting their shareholders."

The EU directive is being adopted by many countries across Europe and was due to be implemented by May. But, Luxembourg has apparently decided to bring the bill forward and chosen to opt out of key provisions designed to prevent boards of companies from erecting bid defences that are not in the interest of shareholders.

The new rules are expected to involve a 95 per cent acceptance threshold before a bidder is allowed to compulsorily squeeze out minority shareholders. In the UK level is 90 per cent.

The French Government too is said to be working on a proposal for Arcelor to buy Eramet, the French mining and metals group.

Arcelor is also considering buying US Steel as a mean of putting itself beyond Mittal's reach.

But a shareholder rights group in France has reportedly warned Arcelor that it could face a shareholder revolt in fending off the Mittal bid.

Another economic columnist in the Times has been very blunt in saying that Arcelor last week ordered the hiring of some private detectives to dig dirt on Mittal -- just in case Dolle (Guy Dolle, chief executive of Arcelor) runs out of Groggy xenophobia to sling at the Asian billionaire.

She said that in a measure of quite how dirty this fight (over the bid) could get, even the selection to find spooks has already prompted an extraordinary bout of mud-slinging.

It was said that Mittals were trying to hire an agency, connected with one Dolle was choosing, to muck-rake on Arcelor. But this has been stoutly denied by the agency's office in London.

First Published: Feb 13, 2006 19:11 IST