Mittal Steel may alter tactics in bid for Luxembourg rival

Firm may approach Arcelor shareholders

May 10, 2006|By NEW YORK TIMES NEWS SERVICE

LONDON -- Mittal Steel may be finished with the friendly approach. Mittal, the world's largest steel company, said yesterday that it planned to take its $27 billion bid for its rival Arcelor directly to shareholders as soon as next week, after an offer to sweeten the deal received no response from Arcelor's management.

Mittal said it was open to reducing family control over the company, splitting management and the board evenly with Arcelor, and sweetening the price if Arcelor's management would discuss a deal. "We would be willing to revise our offer and make significant changes to our corporate governance," the chief executive, Lakshmi Mittal, said at a news conference yesterday.

By last night, though, there was no response from Arcelor, and executives close to Mittal said they held out little hope for a friendly deal.

In January, Mittal, whose holdings include the Sparrows Point mill in Baltimore County, made a cash-and-stock offer worth 28.21 euros a share for Arcelor, to no avail. It is unclear what the outcome may be if Mittal takes its offer directly to shareholders, seeking their votes, but Arcelor shares have traded up sharply since January on market expectations that a deal will be reached.

Mittal also added powerful support that could help it complete a takeover. Francois Pinault, the French billionaire and an ally of President Jacques Chirac, agreed to join its board, the company said yesterday.

Mittal Steel's attempted takeover of Arcelor, a company based in Luxembourg and with deep roots in France, has languished in part because of a distaste among the French for buyouts by outsiders. Mittal has headquarters in London and Rotterdam; Lakshmi Mittal is Indian.

Pinault, founder of the luxury goods company PPR, which owns Gucci, among other lines, is said to be close to Chirac - to the point that he and his wife were hosts to the president at an election-night dinner when he first won in 1995.

Late Monday evening, anticipating an announcement from Mittal, Arcelor issued a statement saying that its chairman, Joseph Kinsch, had received requests for a meeting, but that Mittal had not provided enough information to sit down to negotiations. In particular, he mentioned "Mittal Steel's business plan and other information which would permit an assessment of Mittal Steel's intrinsic value."

Lakshmi Mittal said yesterday that he did not think it was "at all necessary or appropriate" to provide his company's business plan.

Merger specialists not involved in the deal said the viewing of a business plan in such a situation would be unusual. "It's normal to expect to discuss a prospective buyer's plan for the business, but not to make it a condition to meeting at all," said Eric M. Cafritz, a partner in Paris with the law firm of Fried, Frank, Harris, Shriver & Jacobson. "Only a company resisting a bid would do that."

Arcelor's management has said it is unhappy with the Mittal family's reach over its company. The family controls about 85 percent of Mittal Steel through special voting rights. The original Arcelor takeover offer would have reduced that to about 50 percent, and Mittal Steel has now offered to reduce it further.

Lakshmi Mittal may have to sweeten his bid. His cash-and-stock offer was worth 33.40 euros ($42.60) a share yesterday, but Arcelor shares closed in Paris at 35.76 euros ($45.60).

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