Arcelor merger plans smack of hypocrisy

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Arcelor merger plans smack of hypocrisy

London, May 29 (IANS) Arcelor shareholders are being exhorted to vote against the company board's proposal to merge with Russia's Severstal and seriously consider Britain-based steel baron Lakshmi Mittal's takeover bid.

The move to merge with the Russian company once again raised the issue of race in the ongoing Arcelor-Mittal saga. Mittal is of Indian origin while the owner of the Russian company is Alexei Mordashov, said to be a friend of Russian President Vladimir Putin.

British industry observers said Arcelor's merger plans to fend off Mittal clearly smacked of hypocrisy and made no business sense since the proposed new company would produce 50 million tonnes less than what Mittal had projected.

Moreover, it would not have the advantage of Mittal Steel's networks in growing economies of China and India.

'The putrid stink of hypocrisy hangs in the air following the disclosure that Arcelor is planning to merge with Severstal,' wrote Richard Wachman in The Observer.

He added: 'Whatever reservations people may have had about Mittal's takeover plans, they pale into insignificance when you consider the continental stitch-up designed to keep Mittal out of the Europeans' backyard.

'The merger is a complete nonsense as it hands effective control over to Mordashov by diluting the value of the shares held by Arcelor's stockholders and puts a lower price tag on the company than the terms being offered by Mittal.'

On its part, Mittal Steel cautioned Arcelor shareholders that they were being forced into a 'second class combination' through the merger plan while being denied a premium.

Mittal Steel's spokesperson alleged that Arcelor was trying to manipulate its shareholders base for its own ends and warned that the proposed merger would give Mordashov and Severstal too much control.

'Effectively he [Mordashov] can do whatever he wants with the company,' the Mittal spokesperson said.

Meanwhile, the proposed merger has divided Arcelor's shareholders with a minority trying to block the plan on the ground that the shareholders were being forced into agreeing the deal without proper consultation.

Colette Neuville, president of the Association for the Defence of Minority Shareholders, which speaks for some five percent of Arcelor equity, told the media: 'I am very nervous of making a deal with a Russian company because we don't know much about its governance.

'The choice is between a company that is quoted in Amsterdam and New York, where we have some security and transparency for shareholders, and this Russian company where we don't.'

According to Arcelor chief executive Guy Dolle, the proposed combined group would span Russia, Europe, Brazil and the US and create a high-value alliance with the strongest position in key markets for automotive products.

Little is known about the Russian steel baron other than that he was born in 1965 and has close ties to the Kremlin. It is believed in industry circles that Mordashov must have got the Russian government's backing for the deal with Arcelor.

Arcelor said the merger with Severstal was due to be finalised at the end of July.

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Arcelor merger plans smack of hypocrisy