Arcelor rejects offer by Mittal

But talks hinted if bid goes higher

June 13, 2006|By NEW YORK TIMES NEWS SERVICE

LONDON -- Arcelor, one of the world's largest steel producers, formally rejected a 25.8 billion euro hostile takeover bid by Mittal Steel yesterday, but the company said for the first time that it would be willing to negotiate a deal after Mittal's advisers signaled that it might raise its offer again.

It was the first time since Lakshmi N. Mittal, owner of Mittal Steel, announced his takeover plans five months ago that Arcelor has indicated that it would be willing to be negotiate with Mittal, marking a new tone of openness from Arcelor. The companies met face to face last week for the first time, but only to discuss Mittal's business plans for the Luxembourg-based company.

Mittal, the Netherlands company whose holdings include the Sparrows Point steel mill in Baltimore County, has been host to visitors there amid speculation that it could put the plan up for sale to satisfy antitrust regulators if a deal with Arcelor is reached.

Arcelor sought last month to repel Mittal's bid, announcing a merger agreement with OAO Severstal, a Russian steel company controlled by billionaire Aleksei Mordashov.

Arcelor said in a statement yesterday that "Mittal's current offer is inadequate as it continues to undervalue Arcelor," in part because it does not take into account the company's better-than-expected 2005 and first-quarter 2006 results.

After a daylong board meeting Sunday, Arcelor reiterated yesterday that a deal with Severstal, valued at 13 billion euros, or $16 billion, is a better fit. Arcelor asserts that the Severstal offer is worth 44 euros a share. Mittal's cash and stock offer values Arcelor at about 35 euros a share, based on the company's stock price yesterday, and Arcelor has said it would consider being purchased by Mittal if the company revised its bid to 44 euros a share.

"Mittal Steel has not made any proposal to improve the financial terms of its offer and has no intention to do so," the company said yesterday. It noted that if Arcelor's board recommends its takeover offer, Mittal is prepared to improve some terms related to corporate governance only.

The figure of 44 euros a share is "entirely fictitious and without market substantiation," Mittal said. Some investors and analysts have also questioned the 44-euro figure from Severstal, because it relies in part on a valuation of assets that they say are overvalued.

But a person close to the negotiations who did not want to be identified because of the sensitivity of the situation said Mittal's advisers have indicated that Mittal would be prepared to raise its bid.

In the past, Mittal has said it would not improve its offer for Arcelor, only to revise its original bid upward by a third. Mittal is planning a news conference in London today to discuss the situation.

Mordashov of Severstal is confident that his deal with Arcelor is in no danger, a spokesman said yesterday.

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