Arcelor may face investor revolt over Severstal

BRUSSELS: Arcelor, the Luxembourg-based steelmaker which is seeking to fend off an unsolicited bid from rival Mittal Steel, is facing a potential shareholder revolt over its tie-up with Russia’s Severstal, its would-be white knight.

Mittal Steel said late on Wednesday that rebel shareholders of its takeover prey held enough votes to go ahead with their plan to call for a shareholder meeting over the controversial deal.

“We understand that approximately 30% of Arcelor shareholders have already supported a vote on the Severstal deal and we welcome this initiative,” a Mittal spokesman said.

Last week Arcelor unveiled its plan to buy the Russian steel firm, which analysts see as a tactic to fend off its unwanted suitor.
The e13bn deal would involve Severstal’s chief Alexei Mordashov taking 32.8% of an expanded Arcelor.

The deal sparked controversy from Arcelor investors since shareholders representing over 50% of Arcelor’s capital are needed to reject the deal, a figure that seems barely reachable given that less than half of investors attend Arcelor’s general meetings, critics said.

Shareholders have written a letter to the board, disgruntled as they are given little say in the process.

Meanwhile, chief executive of Arcelor said on Thursday it was up to board members to decide how to react to shareholder protests over its plans to merge with Severstal. “When this letter arrives, and I believe it has arrived, the board will analyse it. Let’s wait for it to give its opinion,” Guy Dolle said.

People close to Mittal Steel said according to the Luxembourg legislation, Arcelor must hold an extraordinary general meeting within 30 days. The meeting would propose that votes be counted according to the capital represented at the meeting, rather than all shares existing.

Goldman Sachs, which advises Mittal on its Arcelor bid, coordinated the shareholders’ effort to mobilise investors but Mittal said the potential shareholder revolt was not its initiative.

Separately, a number of shareholders groups said they were considering legal action against the Arcelor-Severstal tie-up in order to get a public offer from Mordashov for the whole of Arcelor or a standard merger procedure, which will need over 66% of investors present at a shareholder meeting to back the deal.

Market regulators in Belgium and Luxembourg said on Wednesday they had approved Mittal’s raised e23.5bn($30.25bn) offer for its rival while French and Spanish regulators were expected to give their clearance shortly.

The Luxembourg regulator said the offer period would be extended until July 5 from a previous date of June 29 and would close at the same date in other markets where Arcelor is listed.