LONDON, 13 June 2006 — European steelmaker Arcelor yesterday rejected an improved bid from rival Mittal Steel as “inadequate” in favor of a proposed merger with Russian group Severstal. But while dismissing Mittal’s 25-billion-euro ($32.4 billion) hostile offer, Arcelor also left the door open to a new bid, although Mittal was quick to insist that it would offer no more.
After a six-hour board meeting on Sunday at its Luxembourg headquarters, Arcelor said that its “board notes that the revisions to Mittal Steel’s offer announced on May 19, 2006, demonstrate that Mittal Steel’s initial offer undervalued Arcelor.
“Notwithstanding the increase in the consideration offered by Mittal Steel, the Arcelor board of directors believes that this offer is still inadequate as it continues to undervalue Arcelor.”
Indian political and business circles were slow in their reaction to Arcelor’s statement. Minister for economics at the Indian High Commission in London, S. Jagadeesan, was unavailable for comment, while his colleague the minister for the press, Kuldeep Bhardwaj, was equally coy, stressing that the Indian government had nothing to say at present on the issue.
British Indian businessmen, similarly were reluctant to comment publicly, although privately many expressed concern over perceived European chauvinism over Asians (and therefore non-Europeans) owning prized corporate and industrial assets in the heart of the European Union.
One Gujarati businessman, J.R. Shah was more to the point: “This whole episode smacks of anti-Asian sentiments. Look what the Americans did to Dubai Ports. They objected to Arabs owning and running ports in the United States. The security reasons were a mere smokescreen. Similarly, Luxembourg and France cannot stomach a successful Indian-owned steel company controlling the industry in Europe. This even though the EU has said that it had no reasons relating to competition to block the bid.”
Mittal Steel is largely owned by Lakshmi Mittal, who is regarded as one of Britain’s wealthiest businessmen with a personal fortune estimated by The Sunday Times Rich List 2005 of 13.5 billion pounds. Mittal has a 60 million pound mansion in Palace Gardens adjacent to Kensington Palace which he bought from Bernie Ecclestone, the Formula One racing tycoon.
Arcelor Chief Executive Guy Dolle has been mandated by his board to meet with Mittal to ask him to improve his offer. Failing that, the Luxembourg-based steelmaker would then pursue a proposed 13 billion euro merger with Russian group Severstal, owned by Russian oligarch Alexei Mordashov.
Mittal’s latest bid, which comprises share swaps backed by cash alternatives, may not be the last in this battle of the steel giants.
A Mittal Steel spokesman confirmed yesterday that the company has “no intention” of improving on the bid, but as an incentive to Arcelor it is prepared to discuss “certain corporate governance initiatives designed to preserve and promote the Arcelor model.” However, the deadline for the acceptance of the bid is July 5.
Mittal’s refusal to up its offer sent Arcelor’s shares retreating from early gains to show a loss of 1.34 percent in early afternoon trading in Paris to 33.25 euros. Arcelor’s rebuff also weighed on Mittal’s shares, which were down 1.16 percent at 23.96 euros in Amsterdam.