Lakshmi Mittal — Photo: AP

London: The world's largest steel producer, Mittal Steel, owned by non resident Indian steel tycoon Lakshmi Mittal, made a daring $ 23 billion offer on Friday to take over its rival, Arcelor, that would create the first over 100 million tonne steel company.

London-based Mr. Mittal told a hurriedly convened news conference that the proposed merger of the world's first and second largest steel groups would create a $ 40 billion company making more than 100 million tonnes of steel a year.

Mr. Mittal said his company, which first approached Arcelor on January 13 for the merger bid without response, was offering $ 22.7 billion [18.6 billion euros]to the shareholders of the Luxembourg-based firm. This will be worth 28.21 euros a share, a 27 per cent premium to Arcelor's closing price on Thursday. Arcelor shares went up 40 per cent to a high of 31.29 euros, more than 10 per cent above Mr. Mittal's offer price. Under the offer, Arcelor shareholders will get four Mittal Steel shares and 35.25 euros for every five Arcelor shares, Mr. Mittal Steel said in a press release.

`Exciting growth potential'

The Mittal family, headed by Lakshmi Mittal, the world's third richest man, would have a 51 per cent stake in the combined business. "We believe the offer for Arcelor provides a very attractive premium and has been structured so that Arcelor shareholders have the opportunity to participate in the exciting growth potential of the combined company, whilst also receiving a generous cash element," Mr. Mittal said.

Mr. Mittal said "the last ten years have seen a major shift towards consolidation of the steel industry, helping to create sustainable value for all stakeholders. Both Mittal Steel and Arcelor have been at the forefront of this consolidation and share a similar vision for the future of our industry. This combination accelerates this process and leaves us uniquely positioned to benefit from the opportunities created."

Large producer of ore

Mr. Mittal said he was confident that "we will have the participation of Arcelor management in the combined entity."

A statement issued by Mittal steel said the combined company would be one of the five largest producers of iron ore worldwide and also have direct ownership of DRI plants, coal mines, coke production and certain infrastructure assets.

The group would have the opportunity to expand its mining operations in order to reduce the dependency on third-party supplies of iron ore and coal. By 2010, the combined group aims to be about 50 per cent self-sufficient in iron ore.

It said the financial resources of the enlarged company would provide the flexibility for the Group to pursue both internal and external growth opportunities. "Mittal Steel is committed to maintaining an investment grade rating," it said. — PTI

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