Mr Lakshmi Mittal?s takeover battle for the European steel giant, Arcelor, is fast assuming epic proportions. Mittal?s initial offer, made almost five months ago, was rejected outright by the Arcelor management and disparaged by European governments. That sparked off a flurry of accusations of racism and protectionism, with the Indian government taking the extraordinary step of reminding the governments of France and Luxembourg that nationality should not have any bearing on commercial dealings. Since then, the Arcelor management has launched an astonishing defence, first raising its dividend to 5 billion euros, higher than the cash portion of Mr Mittal?s bid. Mr Mittal then sweetened the offer, revising it from 18 billion to 25.8 billion euros. Although the Arcelor board pretended to study the new offer, it stunned everybody by announcing that it would take a controlling stake in the Russian steel-maker, Severstal. In return, the Severstal owner, Mr Alexei Mordashov, would get a 32 per cent stake in the combined entity. Significantly, under the merger deal, the Arcelor chairman, Mr Joseph Kinsch, and the CEO, Mr Guy Dolle, would retain their posts in the company. Many of Arcelor?s investors have reacted sharply to the deal, complaining that Arcelor overpaid for Severstal in order to escape Mr Mittal?s clutches. Also, the deal took shareholders for granted. For instance, the Arcelor board has said that it will go ahead with the Severstal merger unless more than half of all shareholders oppose the move at the meeting called on June 30 ? a strange procedure. Attendance rates at Arcelor shareholders? meeting have never, in the past, exceeded 35 per cent. Further, with Arcelor offering to buy back a quarter of its shares, Mr Mordashov?s share may go up automatically, without him putting in any more cash. Even more bizarre is the fact that Arcelor?s lawyers do not seem to know whether the move is an Arcelor takeover of Severstal or a Russian move on Arcelor, and they have filed two sets of documents to take into account both versions. The rebels have now won the right to vote on whether an extraordinary general meeting should be convened and a two-thirds majority is required for the Severstal deal to go through.

It is difficult to avoid the impression that the Arcelor management is willing to go to any lengths to keep Mr Mittal away. Is the move dictated by the fact that Mr Mittal is Indian, while Mr Mordashov is European? Perhaps not ? it may just be a part of Mr Dolle?s strategy to appeal to European patriotism. But there is no doubt that emotive feelings against foreign companies can be whipped up easily, especially against companies or entrepreneurs from the third world. Consider the uproar against Dubai Ports in the United States of America, or the outcry against the Chinese bid for Unocal. In spite of all the talk of globalization, economic nationalism remains a potent force.