Arcelor board faces decision on rebel shareholders

LUXEMBOURG, June 11 (Reuters) Arcelor's board met on Sunday to prepare a response to shareholders unhappy with its "white knight" deal to save the steelmaker from Mittal Steel's unsolicited 22 billion euro (.9 billion) bid.

''I arrive with a very positive state of mind,'' board member Fernand Wagner told reporters on his way into the meeting at Arcelor headquarters at 1300 GMT.

A source close to the company said any announcement on the outcome of the board meeting was unlikely before Monday.

Arcelor's directors are expected to rebuff Mittal's advances formally for a second time and reject its offer at the meeting.

But more difficult for Arcelor is how to handle a revolt by some shareholders, who are angry they have had little say in the company's plans to merge with Russia's Severstal.

Their calls for a special shareholder meeting to vote on the 13 billion euro Severstal deal may give Mittal a decisive advantage due to timetable technicalities.

Some Arcelor investors are resentful that the Severstal deal only can be shot down by holders of over 50 percent of Arcelor's capital at a shareholder meeting. That meeting is scheduled for June 28 but is likely to be delayed by a few days, a source close to Arcelor said.

Goldman Sachs, the investment bank advising Mittal Steel, has helped shareholders with about 30 percent of Arcelor's capital to call for a special meeting to change the voting requirements of the Severstal deal.

Such a meeting would need two-thirds of shareholders present to back the Russian tie-up but would not take place until mid-August, after Mittal's offer is due to end on July 5.

RECOUNT? Arcelor and Severstal have said they will drop their merger if Mittal Steel gets over 50 percent of Arcelor's shares.

It is unclear whether billionaire Lakshmi Mittal will keep a minority stake in Arcelor if he fails to get over 50 percent. If Mittal did keep a minority stake, he could use it to vote at a special shareholders meeting, making it likely that the Russian white knight deal would be killed.

Some investors backing the call for a special shareholders meeting may technically not be entitled to make such a request due to rules on share registration and ownership, sources on both sides of the deal said.

A call to hold a special shareholders meeting must be backed by at least of 20 percent of Arcelor's capital.

Arcelor's board members will have to decide on Sunday whether to order a recount of the rebel shareholders to ensure the 20 percent threshold has been met.

The source close to Arcelor said the company's management was concerned that ordering a recount would stoke investor anger further.

Comments from Arcelor's management have indicated they are frustrated about the debate over which voting requirements to adopt for the Severstal deal, because it has the power to go ahead with a rights issue that would seal the merger without consulting its shareholders.

The prospects of a legal battle over the tie-up are growing.

French minority shareholder group ADAM has said it plans to challenge in court a decision by Luxembourg's financial regulator to exempt Severstal owner Alexei Mordashov from making a full bid for Arcelor.

Mordashov has previously said he does not have the financial means to buy all of Arcelor.

He stands to get 32.8 percent of the merged company, which would rise to about 38 percent once Arcelor goes ahead with a planned 6.5 billion euro share buyback set for July. That is above the 33.3 percent threshold that triggers mandatory offers in Luxembourg.

A Brussels-based lawyer said other shareholders of Arcelor had asked him to explore legal possibilities to force the Russian steel tycoon to make a mandatory takeover offer.

REUTERS VJ BD2012