Luxembourg, reportedly is considering a legal move that could frustrate or even thwart Mittal Steel's hostile €19.6 billion (£13.4 billion) bid for Arcelor.
Key ministers met with lawyers on Wednesday night, combing through clauses in the EU takeover directive that could be used to force Mittal Steel to offer cash instead of stock to Arcelor shareholders, according media reports in London.
Arcelor employs 5,900 workers in the Grand Duchy, where its corporate headquarters is based. The state has a 5.6 per cent stake in Arcelor.
Lakshmi Mittal's current offer is 25 per cent cash and 75 per cent shares. The bid could become much more costly if he has to cover a large cash payment, financed by debt.
Luxembourg's Prime Minister, Jean-Claude Juncker, has been opposing the bid from the outset, calling for "a reaction that is at least as hostile" as the bid itself.
Article 5 of the EU directive says member states "may stipulate" that the buy-out includes a "cash consideration", though the clause does not kick in until the buyer reaches the threshold of 50pc of the shares. Sources close to Mittal Steel, the Telegraph quotes, said they knew nothing about the latest ploy.
Earlier in the day, Mittal said he was "very encouraged" after meeting 30pc to 40pc of Arcelor's shareholders and a top cast of European leaders, insisting they had begun to grasp the "industrial logic" behind the bid.
{{/usCountry}}Earlier in the day, Mittal said he was "very encouraged" after meeting 30pc to 40pc of Arcelor's shareholders and a top cast of European leaders, insisting they had begun to grasp the "industrial logic" behind the bid.
{{/usCountry}}"We've moved away from politics. The proceedings have become more businesslike, and that's a very positive signal," he said, even citing a decision by Luxembourg to hire JP Morgan as an advisor.
Opposition appeared to be melting away in Belgium where the finance minister, Didier Reynders, warned against a crude xenophobia.
"We shouldn't reject a project without first informing ourselves. We are moving into a world of different players. Whether it's China or India, we have to get used to these big economic powers investing in our countries," he said.
Separately, Mittal Steel reported a 60 per cent drop in fourth-quarter profits to $650m (£370m), blamed on a steel glut caused by excess supply from China. Full-year profits fell from $4.7 billion in 2004 to $3.4 billion.
The group said prices would pick up in 2006 as Chinese inventories fell and Beijing shut down mills to save on costly iron ore imports. "We don't see China as a competitive threat. They're not making profits at current prices," said Aditya Mittal, chief financial officer.