Mittal Steel Company NV on June 26 announced that it has reached an agreement with Arcelor to combine the two companies in a merger of equals to create the world's leading steel company. The terms of the transaction, which will be effected by way of a tender offer by Mittal Steel for Arcelor shares, have been reviewed by the Arcelor board, which is recommending the transaction to Arcelor shareholders.
The combined group, to be domiciled and headquartered in
Under the terms of the revised offer, shareholders of Arcelor will receive 13 Mittal Steel shares and 150.60 euros in cash for 12 Arcelor shares. Mittal Steel is also offering to acquire Arcelor Convertible Bonds (OCEANEs 2017) in a mixed offer of 13 Mittal Steel shares and 188.42 euros in cash for 12 Arcelor Convertible Bonds.
In addition, Arcelor shareholders will have the right to receive a cash and stock mix in any proportion they elect, provided that 31 percent of the aggregate consideration paid is paid in cash and 69 percent in stock. The maximum amount of cash to be paid by Mittal Steel will be approximately 8.5 billion euros and the maximum number of Mittal Steel shares to be issued will be approximately 722 million, assuming the conversion of the outstanding Arcelor Convertible Bonds (2017 OCEANEs).
Based on the Mittal Steel share closing price on the NYSE on June 23, the revised offer values each Arcelor share at 40.40 euros. This is an improvement of 2.66 euros, or 7 percent, over the previous offer announced on May 19, computed based on the prevailing Mittal Steel share price on the eve of the announcement of each of the offers and not adjusted for the dividend paid. Adjusting for the dividend, the increase would be 10 percent.
This new offer represents an 82 percent premium over the closing price and all-time high on Euronext Paris of Arcelor on January 26, the last trading day before the announcement of our initial offer.
Following completion of the transaction and assuming a 100 percent acceptance rate of the tender offer by Arcelor shareholders, current Arcelor shareholders will own collectively 50.5 percent of the combined group. The Mittal family will own 43.6 percent of the capital and voting rights of the combined group.
Mittal Steel's proposal was developed following extensive discussions with Arcelor's management over the last few days, and was submitted to the board of directors of Arcelor with the support of Arcelor's management. Following its review of these terms, the board of directors of Arcelor has now resolved to recommend the revised Mittal Steel offer to Arcelor shareholders.
As disclosed by Arcelor, the strategic alliance agreement entered into between Arcelor, SeverStal and Mr. Mordashov will terminate automatically upon (1) the proposed SeverStal combination being rejected by holders of 50 percent or more of Arcelor's capital at the Arcelor shareholders' meeting scheduled for June 30, or (2) Mittal Steel receiving, in its tender offer, more than 50 percent of the fully diluted capital of Arcelor, including the shares to be issued to Mr. Mordashov under the Strategic Alliance Agreement (corresponding to approximately 73 percent of the currently outstanding capital).
It remains critical for shareholders of Arcelor to vote their shares at the June 30 meeting against the proposed SeverStal combination.
Arcelor Mittal will have a unique profile with unprecedented scale, scope and synergies:
- No. 1 position in the global steel industry with steel-making capacity of 120 million tonnes
- Pro-forma 2005 annual revenues of US$71.9 billion and EBITDA of US$13.3 billion
- Pro-forma market capitalisation of approximately US$46 billion
- Leading positions in NAFTA, EU, Central Europe, Africa and
- Expected synergies of US$1.6 billion from purchasing, marketing and manufacturing efficiencies
- Exceptional raw material resources with a high degree of iron-ore self sufficiency
- Reduced volatility through geographic and product diversification
- Security of long-term contracts through high value-added products
- Low cost profile and high growth prospects from developing markets
- Leading position across a range of key product segments
- Ability to supply customers on a global basis
- Best-in-class corporate governance structure promoting the Arcelor model
- Financial strength to support continued investments and growth initiatives
- A dividend policy representing 30 percent of earnings over the cycle
It is expected that, as a result of the amendment to the terms of the offer, the closing date for the tender offer, currently scheduled for July 5, will be postponed by a few days. The new date for the closing of the tender offer will be communicated to the market after approval by the relevant market authorities.
"I am delighted that Mittal Steel and Arcelor have agreed to merge," said Mittal chairman Lakshmi N. Mittal. "This is one of the greatest days in the history of Mittal Steel and a seminal event in the steel industry that will shape its future. Arcelor is an exceptional company with world class assets and highly regarded management. I want to take this opportunity to express my gratitude to all of our employees, shareholders, and business partners for their support throughout this process of creating the best steel company in the world.
"This combination is a natural alliance that represents a transformational change towards realising our vision of a more sustainable and stable industry benefiting all stakeholders. It is a winning combination between our two complementary companies, creating the industry leader that will create significant value for our shareholders."
