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Arcelor Agrees to Be Bought by Mittal Steel

The $33.6-billion deal caps months of hostile bidding and beats an offer from Severstal.

June 26, 2006|Peter Marsh | Financial Times

LONDON — Netherlands-based Mittal Steel Co. and Arcelor of Luxembourg have agreed to a $33.6-billion deal to create a steel group three times larger than its nearest rival.

The deal was hammered out Sunday night after Arcelor agreed to an offer by Mittal that was 43% higher than its original offer unveiled in January.

Steel billionaire Lakshmi Mittal would emerge as head of the world's biggest steel company after a five-month takeover struggle.

The new business, to be called Arcelor Mittal, would have an annual output of more than 100 million tons of steel.

The agreement by Arcelor to recommend the deal to investors comes after an epic tussle between the two businesses.

Arcelor, which had called Mittal's original offer "150% hostile," announced a series of defensive measures, including a share buyback and a rival deal with Severstal of Russia.

Severstal said it was considering its options and was surprised it had not been invited by Arcelor to discuss a revised offer it put forward last week.

The new company would combine Mittal's spread of steel plants on four continents, including sites in low-cost locations such as the Czech Republic, Mexico and Kazakhstan, with Arcelor's mills, which are predominantly in Western Europe and largely make high-grade steel for industries such as the auto sector.

As part of the deal, Lakshmi Mittal, who would own 43.4% of the new company and is currently chairman and chief executive of Mittal, is to stand down from an executive role in Arcelor Mittal.

He would become nonexecutive president of the new company and a member of its 18-member board of directors, with the role of nonexecutive chairman going to Joseph Kinsch, Arcelor's current chairman.

However, when Kinsch retires next year, Mittal would become chairman; his son Aditya, chief finance officer at Mittal, is likely to take one of seven places on the company's management board, which would control day-to-day operations.

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