INDIA BUSINESS WORLD - JULY 2006
THE MONTH THAT WAS...

ARCELOR'S SHAREHOLDERS DUMP SEVERSTAL FOR MITTAL

SHAREHOLDERS in the European steel group Arcelor voted here Friday by a majority of 57.94% to reject an alliance with SeverStal of Russia, clearing the way for a deal with Mittal Steel.

Arcelor board president Joseph Kinsch told a general assembly of shareholders that “more than 50% (of the capital) declared itself against the operation with SeverStal”. He said the supervisory board of Arcelor would “proceed with the resiliation of the contract between our company and Mr (Alexei) Mordashov” who is the chairman and controlling owner of the Russian group.

SeverStal had agreed a merger deal with Arcelor in May that would have seen Mordashov take a 32% stake in Arcelor, but Arcelor management on Sunday accepted an alternative offer to merge with rival Mittal Steel.

SeverStal had been courted by Arcelor as a so-called white knight to help fight against a hostile raid by Mittal Steel.

The shareholders' meeting was one more step in a five-month saga of attempts by Mittal Steel to win Arcelor and create by far the biggest steel group in the world.

Kinsch said that 60.4% of the shares in Arcelor were represented at the meeting.

Arcelor is now recommending acceptance of a share and cash from Mittal Steel which values Arcelor at about € 25.4 billion ($32.3 billion) and would create a group with 320,000 employees producing about 116 million tonnes of steel per year, about 10% of the world market.

A spokesman for Mittal hailed the news. “This is another important step in completing the merger between Arcelor and Mittal. We would now urge shareholders to tender their shares into the Mittal Steel recommended offer by the July 13 closing date,” he said.

Mr Kinsch told shareholders that the plan with SeverStal had offered the best industrial strategy for Arcelor but acknowledged that financial markets had “reacted badly” and that some Arcelor shareholders had also voiced strong opposition. He said the plan for an alliance with SeverStal had not been pulled “out of a hat” but had been in gestation for some time and that a proposed deal had nearly succeeded two years ago.

Late on Thursday SeverStal said in Moscow that it was studying all options regarding Arcelor, raising the possibility of a new merger offer by Mordashov.

Stock market regulators in France , Belgium , Luxembourg and Spain said they had asked the Russian group to clarify its intentions as soon as possible.

Arcelor was formed of formerly stateowned interests in France , Luxembourg , Belgium and Spain.

Mittal Steel is a quoted, privately owned company registered in the Netherlands but controlled by the Mittal family which is based in London but is of Indian origin.