Arcelor shares suspended in board meeting

Luxembourg, Jun 21: Shares in takeover target Arcelor were suspended on Wednesday while directors of the steel group held a board meeting in Luxembourg, pending a statement from the company.

French regulators asked the company, fighting off a 22.7 billion euro bid from Mittal Steel and wanting to merge with Russia's Severstal, to clarify the state of its merger talks.

Directors were meeting to discuss an improved offer by Severstal on merger terms aimed at blocking Mittal's hostile bid in the latest twist to what one fund manager called a five-month ''soap opera''.

Meanwhile analysts and dealers said Mittal faced some pressure to raise its own 23-billion-euro ( billion) bid.

''It seems to be a win-win situation for Arcelor because Severstal has improved the offer substantially and now this might force Mittal to sweeten its offer if it really needs Arcelor,'' said a trader at a French brokerage.

However, shares in Arcelor were off 1.07 percent at 35.02 euros in Paris at the time of their suspension and were up 0.65 percent at 35.61 euros in Brussels.

Severstal shares were up 0.59 percent at 283.01 roubles after reaching an earlier high of 285.87 Mittal shares, traded in Amsterdam, were up 0.99 percent at 25.60 euros, valuing its current offer of 1 new share and 10.05 euros in cash for every Arcelor share at 35.51 euros.

On Tuesday Severstal revised the terms of its merger proposal, saying that its majority owner Alexei Mordashov would settle for 25 percent of the new combined group rather than the initially proposed 32.3 percent.

Under the previous deal, which envisaged Arcelor acquiring Severstal for shares on the basis of valuing Arcelor at 44 euros a share or 29.5 billion euros, Mordashov would end up owning 32.3 percent of the combined group after buying an additional tranche of new Arcelor shares, with that stake increasing to 38 percent under a separate Arcelor share buyback proposal, which was also priced at 44 euros a share.

Mittal said on Wednesday it had no immediate comment to make about the Russian group's move to block its proposed takeover of Arcelor, which also declined to comment ahead of the board meeting.

Arcelor directors also faced their own pressures after a newspaper report that a leading shareholder has recommended that Arcelor scrap its merger plan with Mordashov and make a normal cash and share bid for Severstal instead.

The Financial Times said that Arcelor directors would discuss the proposal by Jose Maria Aristrain at Wednesday's board meeting.

Aristrain, whose family own about 3.6 percent of Arcelor according to Reuters data, also called for the resignation of Chairman Joseph Kinsch and Chief Executive Guy Dolle, the first time that such a request has been made by a shareholder.

''We will see,'' said Arcelor director Georges Schmit on his way into the board meeting, asked if the board would discuss Aristrain's proposal. ''They (the shareholders) can always ask.''

REUTERS

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