Arcelor investors favour Mittal but want more

15 February 2006

Mumbai: Though they favour the $22.6 billion unsolicited take-over bid by L N Mittal's Mittal Steel, institutional shareholders in Arcelor SA, the world's second largest steel company, are holding out for a higher offer, as the battle for take-over moves to the shareholders' court.

Mittal Steel's €18.6 billion ($22.6 billion, £12.7 billion) bid translates to an offer of €28.21 a share for Arcelor — a 27 per cent premium over Arcelor's closing price of €22.20 on the day of the announcement on January 27, this year.

Ever since the announcement, Arcelor's prices have gradually risen. Its share traded at €30.12, in yesterday's trades.

Despite the apparent hostility to the bid by Mittal Steel, many investment analysts in Europe are bullish on the deal going in Mittal's favour. Some are even advocating selling out of Arcelor in favour of Mittal Steel.

The major argument in favour of the deal is that the combination of the world's two largest
Steel companies would boost valuations of steel shares through the consolidation of a fragmented industry (See table) and leverage the synergies of both companies.

Arcelor, as it exists today, is the product of a merger between Spain's Aceralia, France's Usinor and Luxembourg's Arbed four years ago. And just three days before Mittal announced its bid, Arcelor had taken over Canada's biggest flat steel maker, Dofasco, in a hostile $4.9-billion cash offer, beating Germany's ThyssenKrupp, which had tried to act the white knight. (See: ThyssenKrupp backs out, Arcelor wins Dofasco).

Arcelor accounts for half the steel used in European-made cars, and has plants across Europe and Latin America. Three-fourths of its revenues come from Europe, and 11 per cent from Latin America. North America accounts for 9 per cent of Arcelor's revenues.