The Arcelor board "unanimously" rejected the offer, saying it is "inadequate as it continues to undervalue Arcelor" and recommended "shareholders support the proposed
merger with the Russian steel group Severstal and set the price per share of the self-tender at Euro 44 - six euros more than offered by Mittal," Arcelor said in an official statement.
Luxembourg-based steel giant decided not to commence "such self tender offer until after the publication of Mittal Steel's offer results while mandating the group management board to meet with Mittal Steel in order to review its proposal to further improve its offer.
Although there was no formal word from the Mittals, there were indications that NRI steel tycoon L N Mittal might submit a revised offer. Pitching for the deal with the Russian Steel group, the Arcelor board, which met in Luxembourg on Sunday, also asked its shareholders to support the Severstal transactions at the general body meeting on June 30.
Stating that Severstal transactions were more "attractive alternative from a strategic, financial and social point of view," Arcelor took a dig at Mittal Steel, saying that "the revisions of Mittal Steel's offer announced on May 19, 2006 demonstrate that its initial offer undervalued Arcelor.
"Notwithstanding the increase in the consideration offered by Mittal Steel, the Arcelor Board of Directors believes that this offer is still inadequate as it continues to undervalue Arcelor," the statement added.
Dwelling on the reasons leading to the rejection of Mittal Steel's offer, Arcelor said its 34 per cent increase offer was required to re-align with the bid initially offered by the company due to its under-performing share price vis-à-vis Arcelor's share price.
Moreover, Mittal Steel's offer does not take into proper account Arcelor's operating and financial results for 2005, which exceeded market expectations.
The multiple by the Mittal Steel's valuation of Arcelor does not show a control premium when compared with trading multiples of comparable companies, it said.
"The multiple by Mittal Steel's valuation remains significantly lower than multiples in the steel sector," the statement said.
Arcelor last month said it agreed to buy most of Severstal, Russia's third-biggest steelmaker in a Euro 13 billion ($16.4 billion) transaction, which would give Russian tycoon Alexei Mordashov up to 38 per cent of the combined company.
Mittal's offer closes on July 5 to Arcelor's shareholders in Belgium, France, Luxembourg, Spain and the United States. Arcelor said the Severstal transaction would create the world's steel champion and the most profitable steel company.
"The Severstal transaction represents a key step in implementation of Arcelor's value plan and growth strategy and it is consistent with its strategic vision, business model and corporate values."
