Steel giant Arcelor faces takeover resistance

LONDON - Guy Dolle, the chief executive of steel giant Arcelor, will fly into London today with Russian billionaire Alexey Mordashov to persuade investors of the merits of Arcelor's proposed US$13 billion ($20.5 billion) acquisition of Severstal.

The deal is aimed at derailing Mittal Steel's hostile offer for Arcelor.

Mordashov, who owns Severstal, and Dolle received a mixed reception when they announced the proposal last week, with many Arcelor shareholders expressing concerns about the Russian company's lack of transparency and poor corporate governance.

Several key shareholders are concerned that Arcelor may be overpaying for its Russian rival, and have demanded to see the Deutsche Bank report that justifies Severstal's US$13 billion price tag.

An analyst's note published by Commerzbank asserted that the true value of Severstal was closer to US$10 billion, claiming that "Arcelor shareholders will have no benefit at all from the supposed value of US$44 per Arcelor share that is said to be implied in this deal".

Under the terms of the merger Mordashov, one of Russia's wealthiest men with a personal fortune of $13 billion, would receive a 38 per cent stake in the merged entity, which would become the world's largest steel producer.

Arcelor has moved on Severstal in the hope of derailing Mittal Steel's US$26 billion offer for the group. If it pulls off the Severstal deal, Arcelor would put itself well beyond the reach of Mittal.

Dolle claims that after the acquisition of Severstal, Arcelor would be worth some US$44 a share, double the price at which they were trading in January before Mittal made its bid.

Mittal's offer values the company at US$37 a share.

Mittal, which is headed by the Indian steel magnate Lakshmi Mittal, said at the weekend that it would push ahead with its bid regardless of the Severstal situation. Already, several key Arcelor shareholders, including Commerzbank, have said they continue to support the Mittal offer over the Severstal deal.

- INDEPENDENT