World steel giants Mittal Steel and Arcelor unveil merger

Jan 27, 2006, 12:20 GMT

Amsterdam - The world's biggest steelmaker Mittal Steel Co announced Friday an 18.6-billion-euro (22.7-billion-dollar) bid for rival Arcelor SA, paving the way for a major shakeout in the global steel business.

The deal would create a business with a combined revenues of about 68.7 billion dollars and a workforce of 320,000.

The offer for Arcelor, which is the world's second biggest steelmaker, is about 27 per cent higher than the Luxembourg-based group's Thursday closing price.

Mittal, which is owned by Indian-born tycoon Lakshmi Mittal, said the merger of the two companies was necessary to create a 'sustainable operating environment' for the steel industry.

The merger between the two groups is also likely to lead to Mittal selling on the Canadian steel producer, Dofasco to the German giant steelmaker ThyssenKrupp AG.

Essen-based ThyssenKrupp is expected to acquire Dofasco for about 3.8 billion euros or 68 Canadian dollars a share.

Arcelor only brought Dofasco this week for 71 Canadian dollars a share after successfully seeing offer a bid by ThyssenKrupp to acquire the Canadian group.

While trading of shares in both Mittal and Arcelor were suspended earlier, European steel company stocks raced ahead Friday as speculation grew about further consolidation in the steel industry.

Shares in ThyssenKrupp, Germany's biggest steel group jumped by 6.7 per cent in trading in Frankfurt, while shares in Salzgitter AG were up about 7.8 per cent.

Shares in London-based Corus rose by 7.6 per cent.

British-based Mittal has built up a steel giant through a series of high-profile takeovers in the industry with his company only taking over Arcelor last year as the world's biggest steel group.

The offer by Mittal is in cash and shares, comprising 35.25 euros for five Arcelor shares plus four Mittal shares.

Mittal has its headquarters in Rotterdam but is managed from London.

Arcelor was created in 2002 out of Luxembourg's Arbed, Spain's Aceralia and the French company Usinor.

If the purchase goes ahead, the resulting company will produced more than 100 million tons of steel a year.

Analysts say Competition authorities around the world are certain to examine any deal closely.