A day after NRI steel tycoon Lakshmi Mittal jacked up his offer for rival Arcelor to euro 25.8 billion ($33 bn), an increase of 34 per cent over the earlier offer, reports on Saturday indicated that Arcelor investors were unimpressed by the latest bid.
According to Colette Neuville, head of the French small shareholders' group Adam, which speaks for five per cent of Arcelor investors, the new offer was "a step in the right direction" but "it's not in the interests of investors to decide now."
"The investors I speak for have been totally undecided and I imagine this move will make them think again. Perhaps we have not reached the end of the surprises," Neuville said.
The Luxembourg government, the biggest shareholder with 5.6 per cent, refused to comment, saying it would be guided by industrial interests and employment, not financial interests - a view repeated by the Walloon government in Belgium, which holds 2.4 per cent - and said no decision would be taken until late June. Mittal's revised offer runs out on June 29.
The Arcelor board will discuss the offer tomorrow, but is expected to reject it and reaffirm its opposition to a friendly merger, holding out for a significantly improved cash
element before recommending it to shareholders.
According to the 'Guardian', Arcelor executives said they will countenance only an all-cash deal worth up to euro 42 a share as against the revised offer of euro 37.74 per share.
Sceptical sources in Luxembourg said a first evaluation of the offer pinpointed continuing flaws, with the maximum euro 7.6 billion cash offer liable to be shredded if Arcelor pays out its euro 1.85 dividend worth euro 2.5 billion and a proposed euro 5 billion share buyback is approved.
Mittal said the cash element of its offer would be "adjusted" to take account of a share buyback by Arcelor or any issues of new shares.
An extraordinary meeting of shareholders in Luxembourg to approve the buyback was yesterday postponed to June 21 when not enough investors turned up. Sources urged shareholders to wait until that week before making up their minds.
However, a report in 'The Times' quoted analysts as saying that the revised offer was "appealing" and "attractive" and had a strong chance of success.
Arcelor chairman Joseph Kinsch was informed of the revised offer in a telephone call from Mittal on Friday. He has convened a board meeting on Sunday to discuss the increase.
Mittal, who had repeatedly denied he would raise his bid, said he hoped this revised offer would persuade the board of Arcelor to do the right thing by their shareholders and begin a dialogue with him.
"Last time I said it was the best offer, now I am saying it is the most compelling. With a compelling offer, you are compelled to accept it," he said.