Mittal Steel will end the 17-week phoney war with Arcelor tomorrow by launching a full-scale 21 billion euros (US$27.1 billion) bid for its smaller rival in the face of fresh efforts by the pan-European group to shore up its defenses.
Last Friday, as both groups and Germany's ThyssenKrupp published better than expected first-quarter results, Arcelor ridiculed Mittal's financial performance and launched detailed plans to return 5 billion euros to investors by buying up a quarter of its shares in free float.
Mittal, owned by the eponymous billionaire family, immediately cast doubt on the regulatory legitimacy of Arcelor's move and accused its target of deliberately ratcheting up debt -- charges rejected out of hand by Arcelor's advisers.
Aditya Mittal, son of founder Lakshmi and chief financial officer, said the group had already won clearance from US competition authorities for its paper-and-cash bid and expected to win the backing of national regulators in Belgium, France, Luxembourg and Spain early next week.
"But we have been wrong before and we are keeping our fingers crossed," he said, reiterating that Mittal could raise its offer if Arcelor's board recommended the bid.
But he made plain the "structure" of the bid -- 75 percent shares and a quarter cash -- would not change or be driven radically upwards and accused Arcelor's directors of pretending to be open to talks.
Luxembourg-based Arcelor, whose biggest shareholder is the Grand Duchy, hit back, claiming that Mittal's first-quarter results were not only poor, but outshone by their own.
"Our best defense is our results ... I wish to underscore that Mittal's results are very much lower than ours," chief executive Guy Dolle said.
Sources close to the company said that Arcelor had made net earnings of 761 million euros, down 20 percent on last year. But, recalculated from US dollars and from US accounting rules, Mittal's true figures were 478 million euros for the same quarter. Arcelor had outclassed Mittal's earnings per tonne, Lakshmi Mittal's preferred criterion, by 114 euros to 73 euros.
But Mittal, who announced net income of US$743 million compared with US$1.15 billion a year earlier on shipments of steel up 50 percent, said: "We are extremely pleased with our performance."
He claimed a 17 percent rise in operating income on the last three months of last year and of 20 percent in sales.
"We are a global company and our rivals are primarily European," Aditya Mittal said.
He added that the group's business in Europe grew more than 60 percent -- the other steel companies had performed nowhere close to that.
The group's financial chief said that Arcelor's decision to call an extraordinary general meeting next Friday to endorse board plans to buy back and cancel 150 million shares at up to 50 euros a share "raises a number of regulatory issues."
Arcelor originally planned to pay out the 5 billion euros if Mittal's bid failed.
"A tender offer simultaneous with ours is illegal in many jurisdictions ... This complicates, clearly, and frustrates everyone because suddenly you have the potential to have two tender offers," he said.
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