Mordashov, Mittal could both own Arcelor stakes

PARIS, May 30: The prospect of steel tycoons Lakshmi Mittal and Alexei Mordashov ending up with joint control of Arcelor emerged on Tuesday, with a key Mittal executive saying the firm could keep a minority stake.

Roeland Baan, the chief executive for Europe at Mittal Steel, told the Financial Times Deutschland in an interview that the world's biggest steel group by volume had no plans to further raise its offer for Luxembourg-based Arcelor but could end up with a significant stake after its offer expires.

Mordashov, meanwhile, said he could not afford to raise his proposed stake to 45 percent in Arcelor from a third if he wanted to.

Arcelor on Friday unveiled a 13 billion-euro (.59 billion) deal to acquire Russia's Severstal to make it the world's biggest and most profitable steel group in a pact seen by many analysts as aimed at blocking the unsolicited bid by Mittal Steel, majority-owned by founder Lakshmi Mittal.

Arcelor will take over Severstal's assets, including mines and the Lucchini steel firm in Italy, and a cash payment by Mordashov of 1.25 billion euros. In return it will issue shares at 44 euros each to Mordashev, handing him a 32 percent stake.

A shareholders meeting scheduled for late June can block the deal if more than 50 percent of the equity capital votes against.

One of Mittal's banks, Goldman Sachs, is actively supporting Arcelor shareholders that oppose the deal and helping to get together at least 20 percent of the shares to call an extraordinary meeting to change the voting rules.

Mittal's Baan said the Dutch-registered group might end up with a minority stake that could still be very influental.

''It could well be that we in the end perhaps have 40 percent of the shares in a combined Arcelor and Severstal group,'' Baan was quoted as saying by the Financial Times Deutschland.

''Then Mittal and Mordashov would be the two biggest shareholders,'' Baan said.

''With more than 20 percent we would be able to call an Arcelor shareholders' meeting at anytime,'' Baan added. ''We would that way have a lot of power. And we would rather have this influence than no influence,'' he said.

A spokeswoman for Mittal, asked to comment on the newspaper report, said; ''We're evaluating all our options and will decide in due course.'' LACK OF MONEY Severstal owner Mordashov said he would not have the cash to finance raising his stake in Arcelor to 45 percent.

''I said I would like to go to 45 percent but this is impossible as I don't have the money required,'' Russian billionaire Alexei Mordashov told La Tribune in an interview published on Tuesday.

''The Luxembourg law would force me to launch a bid if i went above 33.33 percent by buying shares. According to my agreement with Arcelor, beyond (the) 45 percent (threshold), the bid should even have to be exclusively in cash,'' he added.

Arcelor had no comment.

The Mittal share and cash bid currently values Arcelor's equity at 23.8 billion euros or 37.29 euros per share.

Arcelor shares were trading 1.80 percent lower on Tuesday at 32.21 euros while Mittal shares were 0.76 percent down at 26.05 euros.

Exane BNP Paribas analysts said in a note to clients that the Severstal deal raised questions although it was right for Arcelor to defend its strategic initiatives as a valid alternative to the Mittal bid on the table.

''This alternative transaction challenges Mittal Steel's offer but carries its own uncertainties medium term. Arcelor's management must address the risk associated with an involvement in Russia and having a Russian oligarch as a dominant shareholder,'' they said.

''However, it may consider this one way to force Mittal Steel to pay up. If Mittal Steel remains committed to the deal we expect the company to raise its bid again,'' they said.

REUTERS