ThyssenKrupp had earlier this week dropped out of the bidding after Arclor's C$5.6 billion ($4.9 billion) cash offer (See: ThyssenKrupp backs out, Arcelor wins Dofasco) only to return yesterday by agreeing to Mittal Steel's proposal to acquire Dofasco after the Arcelor take-over would be completed.

Confirming that Thyssen would acquire Dofasco if Mittal Steel's bid succeeded, the German steelmaker's chief executive Ekkehard Schulz told investors at the company's annual meeting in Düsseldorf, that Lakshmi Mittal, the chairman and chief executive of Mittal Steel, had contacted him after it dropped out of the race for the Canadian steel-maker on Tuesday to set out his plans.

Meanwhile, Arcelor has reacted by describing the bid as "hostile" and being made without prior consultations. Mittal, countered by saying that the two companies had been in talks for over 10 days.

Mittal sought to defuse opposition from Arcelor, describing his offer as an unprecedented transaction that would accelerate consolidation in the global steel sector and saying that both companies have been in the forefront of this consolidation and shared a similar vision for the future of the industry. He also said the two companies were a good fit with little geographical or product overlap.

Arcelor's board will meet on Sunday in Luxembourg to decide on its response to the bid.

Arcelor's share prices climbed 30 per cent yesterday on the news of Mittal's offer. It is also being speculated that Mittal would have to raise its bid to succeed.

In addition to the rally in stock prices of other European steelmakers like the UK-based Corus, a part of the Anglo-Dutch Group, and ThyssenKrupp, the prices of US steelmakers like US Steel Corp, Nucor Corp. and AK Steel Holding Corp also rose sharply on speculation that they may be targets for takeovers after Mittal's bid for Arcelor. Standard & Poor's Supercomposite Steel Index of 14 companies rose 4.7 per cent to a record yesterday.

The global steel industry is largely fragmented and the top 10 companies produce about 30 per cent of the world' steel. Mittal's bid for Arcelor is expected to mount pressure on other global majors to consolidate.

Incidentally, Mittal's bid has alarmed the Grand Duchy of Luxembourg, which has a 5.6-per cent stake in Arcelor - a major employer in Europe. To mollify the government's concerns, Mittal suggested yesterday that, if his bid succeeded, he could consider moving the headquarters of the combined group to Luxembourg, where Arcelor is based. He is due to meet the prime minister of Luxembourg on Tuesday.

Global steel majors (in terms of production capacity)

Company	Capacity
Mittal Steel	65 million
Arcelor	55 million
Nippon Steel	30 million
JFE (Japan)	30 million
Posco (S Korea)	30 million
Baoshan (China)	20 million
US Steel	20 million
Corus	20 million