SeverStal offers to raise bid

In a new twist to the battle for Arcelor for whose takeover LN Mittal reached a deal on Sunday, Russian steel giant Severstal on Monday offered to raise the bid for the company. The company said in a statement on Monday that it would present an improved offer at the June 30 Arcelor shareholders meeting, which is due to consider Mittal’s bid.

“If a new offer for Arcelor was made for 100% of its capital, the board must discuss it,” Arcelor chairman Joseph Kinsch said at a news conference in the company of Mittal.

At least 50% of Arcelor shareholders must first vote on Friday to reject a rival merger with Russia’s Severstal, controlled by oligarch Alexei Mordashov. Severstal insisted its tie-up with Arcelor was binding and said it was reviewing its options amid fury from the Russian government and politicians.

Arcelor and Mittal bankers said Friday’s vote was crucial as a failure to block the Severstal deal would trigger an Arcelor share issue, creating difficulties for Mittal. There is also no agreement on what to do with Dofasco, the Canadian unit Arcelor bought this year and wants to keep, but which Mittal has contracted to sell to ThyssenKrupp.

A source familiar to the matter said Mittal would let Arcelor decide. Bruno de Kervilier, president of the French Association of Arcelor shareholders, said he was satisfied with Mittal’s valuation of its target.

However, a union official said Arcelor staff who own shares would vote for the rival deal with Severstal on Friday. Mittal, one of the world’s richest man, will be president and will succeed Kinsch as chairman when he retires. The Mittal family will hold 43.4% of the company.

The combined company will produce about 10% of the world’s steel and have a joint turnover of some 55 billion euros and a total worldwide staff of 334,000, according to 2005 data.

Stuart Fraser, investment director of European equities at Standard Life, said the importance of market leadership would become apparent in a downturn.

“This should lead to higher levels of profitability over the cycle and perhaps a re-rating relative to the market. On initial numbers the new company looks good value to me and will remain a core holding in my portfolios,” he said.