Mittal Steel raises Arcelor bid to 24 bln euros

LONDON, May 19 (Reuters) Mittal Steel, seeking to win back eroding investor support for its bid for Arcelor, raised its offer by a third and dropped a key demand for family control over the combined global steel giant.

In a surprise move just a day after the hostile bid was formally launched, Mittal boosted its total value today by 6 billion euros to above 24 billion euros.

Arcelor shares jumped 13 per cent and Mittal's shed 5 per cent when their shares began trading after the new bid was announced.

Arcelor said it would not comment on the new bid before a board meeting planned for Sunday.

Mittal's move came after the value of its cash and share offer fell more than 10 per cent behind the market value of Arcelor, as the Luxembourg-based target announced a buyback of its own shares at above-market prices to ward off Mittal.

Mittal's improved bid valued Arcelor shares at 37.2 euros by (2030 IST) today, catapulting the offer above Arcelor's stock price, which stood at 35.50 euros.

Mittal, 87 per cent owned by the family of Lakshmi Mittal, is aiming to create a producer of 100 million tonnes of steel per year -- more than three times the size of its closest rival -- by combining the largest and second largest companies in the fragmented steel industry.

But its ambitions have been fiercely resisted by Luxembourg-based Arcelor and have sparked a political storm, with some European politicians fearing job losses.

French Finance Minister Thierry Breton said the government still awaited answers from Mittal on questions about its pledges, while Luxembourg, which has a 5.6 per cent Mittal stake, added it still needed to see the bidder's industrial plan.

Belgium's Walloon region, owner of a 2.3 per cent stake, said its decision on whether to sell would depend on jobs and investment plans and not the financial terms of the offer.

INCREASING PREMIUM A source familiar with the matter said Mittal had weighed raising its offer for more than a week, as Arcelor's share price traded at an increasing premium to its previous bid, implying Arcelor shareholders were unlikely to accept that offer. ''We have addressed all the three issues, industrial logic, value and corporate governance,'' Lakshmi Mittal told a news conference.

''This is not desperation or anything.'' Finance director Aditya Mittal said today, the day after the formal bid launch, was the first day Mittal was technically able to change its offer. ''We are saying look -- we are going to do what it takes to get this transaction done,'' he said.

Gerard Augustin-Normand, head of fund management firm Richelieu Finance, said: ''It is a serious offer, and Arcelor, if it is going to reject it, will have to make clear why. Mittal now has a serious chance of winning, but much depends on the evolution of the Mittal share price.'' At 37.9 euros, Mittal's bid values Arcelor at just under nine times its forecast 2006 earnings per share. At (2030 IST) that compared with multiples of just over 8 for Corus, 10.6 for ThyssenKrupp and 7.35 for Mittal, according to Reuters Estimates.

Mittal Steel first announced its offer for Arcelor on January 27 but had to wait for regulatory clearance for the bid from watchdogs in Belgium, France and Luxembourg before posting its offer document.

Arcelor has urged shareholders to preserve the company's independence and has promised an increased 2005 dividend and a 5 billion euro share buyback at a price above the market level in am effort to win their support.

Mittal may be back in the race, but Arcelor's defensive moves mean the outcome is less than clear cut.

''It's a nice effort but it's not sure this will carry the day,'' said Renaud Berenguier at fund manager Aurel Leven.

REUTERS