Making sense of the Arcelor, Mittal, Severstal soap

As reported yesterday, shares in Arcelor were suspended as the regulators demanded to know what the position was regarding Mittal, following an apparent announcement that Arcelor had agreed merger terms with Severstal.

Now it is somewhat odd to make public the details of a deal with Severstal, when negotiations are ongoing with Mittal, but the senior executives at Arcelor have never made any secret of the fact that they are strongly against the Mittal takeover deal. I am sure that they are desperate to make the Severstal option attractive enough to ensure that they can get support from their shareholders. The fact that they were hoping to avoid giving the shareholders any say in the matter, indicates that they have little respect for, nor feel that they can rely upon those shareholders to support their position.

An initial offer by Severstal’s chairman Alexei Mordashov of 90% of his shares in Severstal for a 32% stake in Arcelor, was adjusted to a 25% stake in Arcelor, and a the dropping of a previously proposed  strategic role for Mordashov, in a bid to make the deal more attractive to Arcelor shareholders.

An indication of the popularity of this proposal can be judged by the fact that the representatives of some 30% of the share capital have requested that voting rules be modified (making it easier to vote against the deal). Whether or not the changed offer will sway shareholders toward the Severstal deal remains to be seen.

Mittal however are continuing their negotiations with Arcelor but are remaining silent on the prospect of an increased offer in response to Severstal’s proposals, although Arcelor C.E.O said that he hoped a revised offer would result in the ongoing negotiations. I cannot help but feel that these negotiations are being held on a far from level playing field with Mr. Dolle (Arcelor CEO) deperate to find any solution that excludes Mittal. I don’t doubt however if Mittal win the day he will claim his actions were designed to increase the value of his company and altruistic in nature. However anyone inclined to that belief, need only revisit some of statements issued about Mittal over the past months to see the truth.

I know this reads like a “soap opera”, but then the comparisons are there, with main characters emerging in a way that the steel industry has been largely unfamiliar with in the past. I don’t know how many more twists and turns are left in this “opera”, but I will keep my eye on the press, and try and keep this blog on tack with developments.