Arcelor to decide on suitors' proposals Sunday

LUXEMBOURG, June 21 (Reuters) Takeover target Arcelor said on Wednesday its board would decide on the latest rival proposals from Mittal Steel and Russia's Severstal on Sunday and then make a recommendation to shareholders.

''The board has decided unanimously to meet again on Sunday June 25 at 10 a.m. (0800 GMT) in order to take a decision regarding the latest proposals of Mittal Steel and of Mr Mordashov (owner of Severstal),'' the company said.

The statement followed a meeting of the directors to discuss which suitor offered the best match after Severstal improved the terms of its agreed merger proposal, aimed at blocking Mittal's 23-billion-euro (-billion) bid, and marking a further twist in what a fund manager described as a five-month ''soap opera''.

Shares in Arcelor had been suspended pending the statement from the group after French regulators had asked the company to clarify the state of its merger talks with both groups and to provide more financial details about the proposed merger with Severstal, a source familiar with the situation said.

Meanwhile analysts and dealers said Mittal Steel, owned by Indian-born billionaire Lakshmi Mittal, might improve its own 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.

But a Mittal spokesman said no new proposals were made to Arcelor and some analysts suggested Mittal might have the upper hand already.

''At this stage they (shareholders) seem to be favouring his transaction rather than Severstal,'' said one analyst, who declined to be named.

Asked whether he was confident of an improved Mittal bid by Sunday, Arcelor Chairman Joseph Kinsch said ''we'll see that on Sunday'' after leaving the meeting which he called ''constructive''.

Shares in Arcelor were off 1.07 percent at 35.02 euros in Paris at the time of their suspension.

Severstal shares closed down 0.12 percent in Moscow at 281 roubles. Mittal shares ended up 2.68 percent at 26.03 euros, valuing its current offer of 1 new share and 10.05 euros in cash for every Arcelor share at 36.08 euros.

WARY SHAREHOLDERS On Tuesday Severstal, advised by Lehman Brothers and ABN Amro, 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 merger proposal, Arcelor had agreed to acquire Severstal for shares on the basis of valuing Arcelor at 44 euros a share or 29.5 billion euros and giving Mordashov 32.3 percent of the combined group after buying an additional tranche of new Arcelor shares for 1.25 billion euros in cash.

It was envisaged that that stake would then increase to 38 percent under a separate Arcelor share buyback proposal, which was also priced at 44 euros a share.

Mittal said on Wednesday its own talks with Arcelor were continuing and constructive, and attacked the latest Severstal proposal for not dealing with shareholder concerns.

''Where are the 2 billion euros?'' said Colette Neuville, president of the minority shareholder group ADAM, referring to a Severstal statement which said the new proposal represented a 2-billion-euro improvement to Arcelor shareholders.

''I want it to be explained to me,'' she said.

Others said they remained concerned that Arcelor will only cancel the Severstal deal if shareholders representing 50 percent of the capital vote against it.

Arcelor said on Wednesday shareholders have until June 28 to register their shares, which they have to do in order to participate in the vote.

(Additional reporting by Anshuman Daga in London and Sabina Zawadzki and Emma Davis in Brussels) REUTERS KD PM2316