Arcelor investors seek to block buyout
17 August 2007, BRUSSELS (AP) - Hedge fund investors in steel giant Arcelor SA are seeking a Dutch court order to stop the EUR 30 billion Mittal Steel Co. NV takeover that offers them a share swap they are not happy with, Arcelor said Thursday.
17 August 2007
BRUSSELS (AP) - Hedge fund investors in steel giant Arcelor SA are seeking a Dutch court order to stop the EUR 30 billion Mittal Steel Co. NV takeover that offers them a share swap they are not happy with, Arcelor said Thursday.
The company, which already calls itself ArcelorMittal, said it had received a writ of summons from three funds - SRM Global Master Fund Ltd. Partnership, Trafalgar Catalyst Fund and Trafalgar Entropy Fund - to appear Wednesday at a court in Rotterdam, where Mittal is based.
Arcelor said the writ seeks an injunction to block the first phase of the merger, when Mittal combines with ArcelorMittal SA, a holding company. Mittal had planned to seek shareholder approval for this on 28 August and complete it on 3 September. ArcelorMittal would then merge with Luxembourg-based Arcelor at a later date.
The summons is just the latest speedbump in the creation of a steelmaker that will control around 10 percent of global production; Brazilian authorities forced Mittal to pay more for Arcelor's Latin American units, adding nearly EUR 4 billion to the cost of the deal, and the companies had to sell plants in Europe and the U.S. to win regulatory approval.
The hedge fund investors, who represent half of the remaining minority shareholders and hold around 3 percent of the company's capital, are unhappy that the second phase of the merger will be governed by Luxembourg law instead of Dutch law.
They allege that this allows the company squeeze them out with a lower offer and dodge a Dutch rule requiring Mittal to control 95 percent of Arcelor capital before it could launch a mandatory buyout. Mittal has 94 percent at the moment.
ArcelorMittal said there were no grounds to the shareholders' claims.
Chairman Joseph Kinsch said in April that shareholders were wrong to fear that a new offer would be lower, saying Mittal had offered an excellent price. He also criticized the rebels as speculators who had bought into the company during the hostile-turned-friendly takeover bid last year.
Hedge fund activists say this shouldn't matter as all shareholders should be treated the same and all sought to increase the value of the company.
In May, Arcelor had offered to buy out the stragglers at a lower share exchange than offered last summer. Arcelor's board said three investment banks had agreed that this was fair and it would be checked with independent auditors.
But some of the shareholders threatened legal action at that stage, saying the new offer should be higher because the original did not take into account the brighter prospects for the steel industry and a court ruling that the company could keep Arcelor's newly purchased Canadian steelmaker Dofasco Inc.
[Copyright AP 2007]
Subject: Belgian news