Mittal Steel launches formal bid for Arcelor

The world's largest steel maker, the Rotterdam-based Mittal Steel Co officially launched its €21-billion ($27 billion) offer on Thursday for Luxembourg-based rival Arcelor S A, the second-largest steel maker, seeking an acquisition that would leave Nippon Steel, the next largest player a mere third the size of the combined entity.

The formal cash and stock offer, launched in Luxembourg, France and Belgium, is open until June 29. Mittal Steel has said that it would extend the launch bids in Spain and the US, once regulators clear the offer. At their end, Arcelor's shareholders are meeting today to discuss the buyback proposal.

Merging the world's top steel makers would create a firm with a 10 per cent share of global steel production and a market capitalisation close to $40 billion (€33 billion).

Arcelor has so far rejected the offer as hostile, saying the Arcelor's current management was in the best interest of the company's shareholders. Arcelor's largest shareholder is the Grand Duchy of Luxembourg with a 5.6-per cent stake and the Walloon province of Belgium. Small and institutional investors hold most of the company's equity.

On January 27, 2006, Mittal Steel had announced its plans to acquire Arcelor (See: Mittal Steel bids for Arcelor) close on the heels of Arcelor's acquisition of Dofasco, Canada's biggest flat steel producer barely three days earlier. (See: ThyssenKrupp backs out, Arcelor wins Dofasco).

Though Mittal Steel was nowhere in the picture here, the Dofasco deal strengthened the French company's position in the all-important North American automotive market for steel, where Mittal had acquired Wilbur Ross's Ohio-based ISG for a record $17.8 billion deal to become the world's largest steel-maker, dethroning the European combine, Arcelor. Mittal Steel has eight major plants in Indiana, Ohio, West Virginia, Maryland, Pennsylvania, South Carolina and Illinois, is the fourth largest steel producer in Canada.

In a move to fend-off the takeover, Arcelor says it plans to spend up to €7.5 billion ($9.5 billion) to buy back almost a quarter of its own shares. (See: Arcelor proposes share buyback to fend-off Mittal Steel's take-over bid)

Lakshmi Mittal, chairman and CEO, Mittal Steel, said in a statement, "We continue to believe that our offer is a very attractive one, structured to enable Arcelor shareholders to participate in the exciting growth potential of the combined company, whilst also receiving a generous cash element."