Mittal: Shot in the arm

Brussels, June 2 (AP): European Union antitrust regulators today approved Mittal Steel Co’s takeover bid for rival Arcelor SA, but with a rider. If the bid succeeds, the new combined steel giant will have to sell off some of its facilities.

The European Commission said its investigation into Mittal’s $33-billion bid for Arcelor showed it “would not significantly impede effective competition” in the 25-nation bloc.

The commission has said Mittal would have to sell off some of its production lines making heavy section beams, which the steel-maker has agreed to do.

If its bid succeeds, Mittal Steel plans to sell two Arcelor heavy and medium section steel mills in Germany and Italy and a Mittal mill in Poland.

The commission has said the three plants account for around 10 per cent of the total production capacity for heavy products in the EU, Norway, Switzerland and Iceland.

It feared the combined company would become the dominant producer of heavy beams, leaving limited options for customers.

“The other competitors active on the market would be much smaller in terms of production capacity, geographic coverage and product range,” the commission said.

EU competition commissioner Neelie Kroes said she was completely satisfied that these requirements would be met through the substantial remedies offered by Mittal.

The commission said its investigation showed the two companies’ businesses “are largely complementary”, saying Arcelor was principally active in western Europe, north and south America, while Mittal was strong in north America, central and eastern Europe, Africa.

The EU blessing is likely to put added pressure on Arcelor shareholders as they mull Mittal’s bid and a separate bid put together by Arcelor and Severstal to merge in an attempt by the Luxembourg-based steel giant to avoid being taken over by Mittal.

Last week, Arcelor SA reached a deal that would give it a controlling stake in Severstal and $1.59 billion in cash in exchange for 32 per cent of Arcelor.

Mittal today handed a detailed plan of its takeover to Arcelor at its Luxembourg headquarters.

Roelan Baan, chief executive of Mittal Steel Europe, told Dow Jones Newswires his company had “absolutely no plan” to raise its bid for Arcelor after the Arcelor-Severstal merger plan.

Mittal needs more than 50 per cent of Arcelor shareholders to sell their stock to Mittal to overturn the planned Luxembourg-Russian merger.

Baan said he remained confident Arcelor shareholders will accept Mittal’s offer by July 5, which is when the formal takeover offer closes.

Even if that is not the case, Mittal may still decide to keep a minority stake in the company, Baan said. “We will not take a decision until that day and moment arrives.”