Sun, May 21, 2006 page11

• Mittal sweetens bid for Arcelor

  `COMPELLING' OFFER The steel giant raised its bid for Arcelor by one third and said it would give up family control, putting the ball in Arcelor's court to make a decision

  • NY TIMES NEWS SERVICE
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  Mittal Steel made a last-minute effort to seal the industry's largest merger ever on Friday, increasing its bid for Arcelor by a third to US$32.9 billion, and making a crucial pledge to cede family control if a deal is cemented.

  The founder and chief executive of Mittal, Lakshmi Mittal, unexpectedly announced the increased bid a day after an offer for Arcelor was officially tendered to shareholders. The move was aimed at wooing Arcelor management into friendly talks, after a period of wrangling that at one point turned into a corporate clash of civilizations.

  Mittal said the increased offer "shows the Mittal family is willing to change."

  "I hope Arcelor's management is also willing to change," he said.

  Arcelor's reaction to the surprise offer was public silence, though Mittal said that Arcelor's chairman, Joseph Kinsch, had told him in a telephone conversation that Arcelor's board would vote today on whether to accept the improved deal.

  Arcelor previously called a special shareholders meeting for Friday to vote on a plan to return US$6.4 billion to shareholders, but the vote was postponed.

  Rumors, meanwhile, swirled through the Russian markets that Arcelor could be in talks there to keep Mittal Steel at bay.

  Mittal is offering Arcelor shareholders a choice of one Mittal share and euros equal to US$14.17, or 17 Mittal shares, for each 12 Arcelor shares.

  If the deal is accepted, the Mittal family, which controls 87 percent of the company, would control 45 percent of the new company.

  "This is the most compelling offer you've ever seen," Mittal said. "Time is ticking and now is the time for Arcelor management to decide."

  Arcelor shares closed up 8.9 percent in Paris at 34.84 euros, or US$44.47.

  Some shareholders and analysts said the increase was welcome, but whether Mittal would win the deal was still unclear. Investors have until late June to tender their shares, but that deadline may be postponed.

  "The fact that we've received both a higher price and an offer of shares in Mittal makes this very interesting," said Collete Neuville, the head of the Association for the Defense of Minority Shareholders, a French organization that holds Arcelor shares. "We will certainly study it."

  Waiting until the last minute to change the deal may be a smart strategy, analysts said.

  "They were probably trying to flush out all of Arcelor's issues and objections," said Michelle Applebaum, a steel analyst in Chicago. "Had they done this earlier, Arcelor would have just thought of new things to object to."

  In Russia, meanwhile, the stock price of the steel group Severstal climbed this week on speculation that it could be planning a deal with Arcelor, after Aleksei Mordashov, the majority owner, met with President Vladimir Putin in the Black Sea resort of Sochi on Tuesday.

  Severstal is one of Russia's largest steel companies, producing 12.3 million tonnes a year. The company has been expanding outside Russia and produces 2.3 million tonnes at Severstal of North America in Michigan, a supplier to Ford Motor.

  In Russian business, approval from the Kremlin is seen as necessary in major deals and would suggest that talks had progressed to an advanced stage. Insider trading and investors betting on a possible merger drove up the price, metals analysts in Moscow said.

  The companies declined to comment about any possible deal.

  They have done business together in the past. Last month, Prince Guillaume of Luxembourg visited Russia for a ribbon-cutting ceremony on a joint venture between Severstal and Arcelor.

  On Friday, the Luxembourg government, which is the largest Arcelor shareholder, said it was waiting to see an industrial plan that would include impact on jobs before it approved any deal with Mittal.

  Aleksandr Pukhayev, a metals analyst at Deutsche UFG in Moscow, said the jump in Severstal stock was fed by more than just merger speculation. "It is remarkable and shows something is happening," he said.
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