Arcelor-Severstal merger 2nd class: Mittal

Aggressively purusing the takeover of Arcelor, global steel major Mittal cautioned shareholders on Friday of the rival company that they were being forced into a second class combination through a merger deal with Russia's Severstal.

Mittal Steel said the result of Arcelor's merger with Severstal would be a 'second class combination', and only the Mittal/Arcelor combination offers true step-change cosolidation.

Earlier on Friday, Arcelor SA agreed to buy a controlling stake in Severstal in a $16.6-billion deal, which may fend off the hostile bid from Mittal. The combination is likely to surpass Mittal Steel as the world's largest steel maker.

Under the deal, Severstal will get 295 million shares or 32.2 per cent stake of 44 euro each in the merged company, Luxembourg-based Arcelor said on Friday.

Arcelor plots Mittal's exit

Arcelor will get an 89.6 per cent stake in Severstal, besides other steel and mining assets and 1.25 billion euros in cash from Severstal's owner Mordashov, it said.

While reacting to the development, Mittal Steel said: "Arcelor's shareholders are being forced to hand over control of their company, whilst being denied a premium."

The company's spokesperson Paul Weigh said that yet again the board of Arcelor appears to be manipulating its shareholders base to its own ends and the vote to veto is unprecedented and prevents the shareholders from having a real choice in the future of their company.

Mittal Steel last week raised its bid to euros25.8 billion.

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