Translated material
Severstal laid out its trump cards
Alexey Mordashov met halfway to Arcelor shareholders
The passions surrounding the Luxembourg steel company Arcelor are heating up. After the head of Arcelor, Guy Dollet, said that in the current conditions and with constant pressure from shareholders on the company's management, he expects improved offers from both contenders - Severstal and the Indian Mittal Steel - the Russian company really agreed to meet Arcelor shareholders halfway . Late the day before yesterday, Severstal proposed changing the terms of the merger deal with Arcelor, signed by the companies on May 26. In fact, the head of the company, Alexey Mordashov, has formulated a completely new proposal, which indeed looks more attractive to the co-owners and should moderate the ardor of supporters of the merger with the Lakshmi Mittal corporation.According to Severstal, Mr. Mordashov is ready to receive 25% of Arcelor as a result of the merger (under previous conditions, he would have received 32.2% upon closing the deal, and if the buyback of shares from Arcelor shareholders had taken place before that, then 38%) . In addition, he proposes to eliminate the strategic committee to ensure the unification process. In exchange, Mr. Mordashov expects to receive the right to vote his stake in accordance with normal shareholder practice and to cancel the obligation that he was prepared to accept earlier - not to change his stake in Arcelor for four years and not to sell shares for five years . In addition, under the terms of the deal proposed for revision, Mr. Mordashov refuses to pay the company 1.25 billion euros (in addition to the exchange of shares), which is currently provided for by the current terms of the deal. All other terms of the merger agreement are proposed to remain the same. In addition, Mr. Mordashov confirmed his intention not to increase, either actively or passively, his shareholding in Arcelor to more than 33.3% without putting forward a full-scale offer to acquire the company under Luxembourg law.
As Severstal said in a statement, “the revised terms are much more attractive for Arcelor shareholders, and the corresponding valuation of the assets contributed by A. Mordashov is highly favorable.” Vremya Novostey's source in the company says that since "the deal is taking place in a fierce competition, it can be won by improving conditions for Arcelor shareholders." At the same time, the newspaper’s interlocutor emphasized that in the event of further discussion of the parameters of the transaction, Mr. Mordashov does not consider it possible to consider receiving a stake of less than 25%.
At the same time, Mr. Mordashov actually leaves for himself the opportunity to subsequently achieve the initial parameters of participation in Arcelor. He retains funds that, if restrictions on his purchase of shares in a Luxembourg company are lifted, he will be able to spend on purchasing them on the market - moreover, he will receive standard, rather than reduced, rights in managing the merged company. “Despite the fact that the previous conditions were aimed at acquiring a 32% stake, they contained a number of significant restrictions: Mordashov’s obligations not to change his stake in Arcelor for four years, not to sell Arcelor shares for five years, and to vote shares on the recommendation of the board of directors.” , says Nikita Fedorov, lawyer at Grigoriev and Partners. In his opinion, the new proposal removes these restrictions, which means that Alexey Mordashov, if his proposals are accepted, will continue to fight for increased control over Arcelor. However, intense competition between Russian and Indian investors led to a strong increase in prices for Arcelor securities. Now a 7% stake on the market is worth more than 1.5 billion euros (based on the average price for last year, it would cost less than 1 billion euros).
Yesterday, Arcelor management announced an emergency convening of the board of directors to discuss Severstal's new proposals. Exchanges in Brussels, Luxembourg, Paris and Madrid, meanwhile, by order of European regulators, suspended trading in Arcelor shares to avoid speculation until they received an official statement from the company's board of directors. The Euronext stock exchange suspended trading on June 16.
Arcelor's board appears unable to make a decision on either Mr Mordashov's improved proposal or the progress report on negotiations with Mittal Steel. The company announced that these issues will be taken up again at a board meeting next Sunday morning. Obviously, Arcelor decided: if you still have to choose “the lesser of two evils,” and some of its shareholders continue to insist that the deal with Mr. Mordashov should be considered an evil, then it is necessary to at least sell itself at a higher price.
The takeover offer for Arcelor proposed by Lakshmi Mittal in January of this year actually marked the beginning of the end of the company as it previously existed. Even then it was clear: whether Mittal would succeed in absorbing Arcelor or not, the company would have to change. It is no less obvious that the arrival of Severstal head Alexei Mordashov at Arcelor, along with all his Russian assets, would have created a completely different company.
After Mr. Mordashov proposed new conditions, Mittal must make its move in the game for Arcelor. As one of the managers of the fund holding Arcelor shares told AP, now, in order to make his offer attractive to Arcelor shareholders, Mr. Mittal will have to raise the price to at least 41-42 euros per share (the current offer offers only 36. 4 euros). “The fight between Severstal and Mittal Steel is essentially turning into an auction. Mittal's offer no longer appears exclusively hostile. And now it all depends on who can raise rates faster,” says this manager. And the closer the meeting of Arcelor shareholders on June 30, which should approve or block the deal with Mr. Mordashov (and, consequently, the possibility of a deal with Mittal Steel), the more intense the struggle will be.
However, the possibility of holding the meeting was called into question yesterday by a lawsuit filed by the French holder of Arcelor shares, Colette Neuville (the size of her stake is not reported), in the Luxembourg court demanding its cancellation. As ITAR-TASS reports, in her lawsuit, Ms. Neuville insists that in preparing the deal and the meeting, Arcelor violated the procedures established by the charter. Today the court will decide whether it is ready to accept this claim for consideration.