In a major setback for steel giant Mittal Steel, Arcelor announced a merger with Russian company Severstal on Friday.
The merger, which is likely to be finalised by July end, will create the world's biggest steelmaker with a turnover of $59 billion.
The deal values Arcelor at 44 euro per share, excluding a proposed 1.85 euro dividend, a premium to the 35.62 euro a share of the cash and share offer currently offered by Mittal.
However, Mittal Steel said the Arcelor move will not impact their bid. According to Mittal Steel, they need to get the support of 50 per cent Arcelor shareholders to go ahead with their deal.
Arcelor too acknowledged that if Mittal Steel manages to secure the support of 50 per cent of its shareholders, the proposed merger deal with Severstal would not happen.
Under the agreement with Severstal, the Russian company's president and owner, Alexey Mordashov, would contribute his economic interests in Severstal and Italian steelmaker Lucchini in return for Arcelor shares.
He will also contribute 1.25 billion euro in cash to Arcelor. Mordashov will receive about 32 per cent of the new merged group and the position of non-executive president of the Arcelor board of directors.