| In the thick of things
Luxembourg/London, June 12 (Agencies): Arcelor has formally rejected the 25-billion-euro unsolicited acquisition bid by Mittal Steel, although rebel shareholders of the steelmaker managed to secure a special vote today that could jeopardise the firm’s plans to merge with Russia’s Severstal and boost its rival’s chances.
The rebels, concerned they may fail to drum up 50 per cent support at a June 30 shareholders meeting to block the Russian deal, won the right to hold a second vote that day calling for another meeting in August to consider the deal under revised voting terms.
Arcelor’s board said it saw the move as a spoiling tactic engineered by its rival. A vote in August would require two-thirds of the represented Arcelor shareholders ' rather than just 50 per cent ' to vote in favour of the 13-billion-euro Russian tie-up.
Although the Arcelor board “unanimously” rejected the Mittal Steel offer, saying it is “inadequate as it continues to undervalue Arcelor”, it has agreed to meet officials from the world’s largest steelmaker to review its proposal to further improve the offer.
“Having noted that Mittal Steel recently indicated that it was prepared to further improve its offer in the context of a recommended transaction, the Arcelor board has mandated the group management board to meet with Mittal Steel,” Arcelor said.
The meeting would “explore such possible improvements” to Mittal’s bid.
Mittal Steel, however, said it had no plans to improve the financial terms of its offer but was prepared to make changes related to corporate governance. “Mittal Steel would like to reaffirm that its proposal to further improve the offer in the context of a recommended transaction relates only to certain corporate governance initiatives designed to preserve and promote the Arcelor model,” the company said.
Goldman Sachs, the investment bank advising Mittal Steel, has played a key role in helping shareholders with about 30 per cent of Arcelor’s capital to call for a change in the voting requirements for approval of the merger.
If dissident Arcelor shareholders do not gain the support of 50 per cent of the steelmaker’s capital to vote against the Severstal deal on June 30, they will be asked to vote on a resolution that calls for a special shareholders meeting to be held towards the middle of August.
Arcelor’s board said it was concerned that this new shareholder meeting would give Mittal a decisive advantage due to timetable technicalities.
Mittal’s current takeover offer is due to close on July 5 and it is yet unclear whether billionaire Lakshmi Mittal’s company would keep a minority stake in Arcelor if it fails to get over 50 per cent.
If Mittal did keep a minority stake, it could use it to vote at a special shareholders meeting, making it likely that the Russian white knight deal would be killed off, Arcelor said.
Arcelor’s management favours the Severstal deal as a white knight that would ward off Mittal’s cash and shares bid ' currently worth about 21.7 billion euros ($27.39 billion) ' which would combine the top two steel makers in the world.
Arcelor shares were trading down 1.10 per cent at 33.30 euros after an early rally today, while Mittal shares were down 1.40 per cent at 23.90 euros.
Comments from Arcelor’s management have indicated they are frustrated by the debate over voting requirements for adopting the Severstal deal, because it has the power to go ahead with a rights issue to seal the merger without consulting shareholders.
Arcelor said it had set its buy-back scheme price at 44 euros per share.
Speculation continued over whether Arcelor would put its merger on hold if investors voted to hold a new meeting in August.
Shareholders appear to have grown impatient with the months-long saga and some have called for talks with Mittal, while others said they would legally challenge the Severstal deal.