Ready to give in

Lakshmi Mittal may sacrifice a controlling stake in the company merged with Arcelor for the sake of the merger itself

It seems that for the head of Mittal Steel Co., registered in the Netherlands, a native of India, Lakshmi Mittal, buying his closest competitor, Luxembourg-based Arcelor, has become a matter of principle, and he is even ready to make some concessions to attract Arcelor shareholders. According to Britain's Financial Times, Mr. Mittal is now considering agreeing to a less-than-controlling stake in the combined company, which could make it easier for Arcelor shareholders to accept his $18.6 billion takeover offer. the refusal of members of Mr. Mittal's family holding shares in the current authorized capital of Mittal Steel, and himself, to “double” vote their ordinary shares in the merged company. The Indian tycoon's advisers recommend abolishing this privilege. Moreover, Mr. Mittal is even ready to increase the financial offer for Arcelor. However, details of the expected volume of increase in the offer to purchase Arcelor, as well as the size of the reduction of Mr. Mittal's share in the merged company, have not been reported.

Currently, the free float of Mr. Mittal's steel empire is about 12% of the total shares. The rest is owned or controlled by his family. While Arcelor’s policy assumes circulation of at least 85% free float on the market.

In the Arcelor takeover bid that Mr Mittal put forward on January 27 this year, he said he wanted to gain control of at least 50.1% of the shares in the combined company. It was assumed that 49% of the shares of the merged company would be able to circulate on the free market. At the same time, three weeks ago, in an interview with Indian Businessweek, Mr. Mittal said that he considers family management of a company to be the most effective form of management. “We don’t want to give up family control. We believe that family-managed and controlled companies have the potential to create greater shareholder value. In Europe, this scheme was also once used, and it demonstrated very successful results,” the magazine quotes the world’s largest metallurgical magnate.

Last week, Arcelor's management wavered, and the head of the company, Guy Dollet, said for the first time that he did not rule out the possibility of negotiations with Mittal Steel to discuss the issue of merger. It should be noted that Arcelor immediately perceived the takeover proposal from Mittal Steel as hostile, while Lakshmi Mittal spoke of synergy. Agreeing to negotiations is, in fact, the first step towards considering Mittal Steel's proposal. However, at the same time, in the French press - and France, although the country's government does not have a stake in Arcelor, is one of the ardent opponents of the merger of the two largest companies - a 6-page document appeared in the French press, written by Mittal Steel in order to explain the details of the proposed merger. The fact of its publication darkened the joy of Mr. Mittal's company over progress in the process of a possible merger. Mittal Steel expressed surprise that the confidential document, addressed only to interested parties - namely home governments, regulators and major Arcelor shareholders - was published. From now on, the company has promised to maintain the secrecy of confidential documents relating to the merger, which it intends to distribute to interested parties.

Mittal Steel is now preparing a full-scale document, which it intends to provide to Arcelor shareholders. It will outline the benefits of the merger. One of the arguments is that by 2010 the united company could control more than 15% of the global steel market. Now the companies collectively account for about 10% of global steel production (about 6% for Mittal Steel and 4% for Arcelor).

Anna LANDER