Arcelor directors have accepted a partnership offer from Mittal Steel, a spokesman for Mittal Steel said on Sunday.
LUXEMBOURG/LONDON: European steel maker Arcelor bowed to an improved 25.8 billion euro ($32.46 billion) takeover bid from Mittal Steel on Sunday to create a world steel giant three times larger than its nearest rival.
After a bitter five-month battle involving an Indian-born billionaire, a Russian oligarch and several European governments, Arcelor Chairman Joseph Kinsch announced his board had voted to accept for Mittal's revised cash-and-stock offer.
"In the end, it was decided unanimously by the Arcelor board that (it will) recommend the new offer by Mittal Steel," Kinsch told reporters, adding that Mittal's improved bid was a 10 per cent premium over its previous offer.
The decision after a nine-hour board meeting represented a climbdown by Arcelor's management, which had cobbled together a white knight deal with Russia's Severstal, controlled by steel magnate Alexei Mordashov, to try to fend off Mittal.
Amid mounting shareholder agitation against that idea, Arcelor entered talks this month to end the feud over Mittal's unsolicited plans to acquire its rival and create a global champion with an annual output of more than 100 million tonnes.
"We have always sought a recommended merger in the interests of all stakeholders -- we are delighted that is what we have now achieved," a Mittal spokesman said.
The new company will be called Arcelor Mittal and will be based in Luxembourg. Mittal Steel founder Lakshmi Mittal, the world's third-richest man, will be president, and Arcelor's Kinsch chairman until he retires next year. The Mittal family will hold 43.4 percent of the company.
The revised Mittal bid valued the European steelmaker at 40.40 euros a share, a source familiar with the deal said. That was 15 percent above Arcelor's last traded price before its shares were suspended last Thursday, and 45 per cent above the value of Mittal's first offer unveiled in January.
The combined company will produce about 10 per cent of the world's steel and have a joint turnover of some 55 billion euros and a total worldwide staff of 334,000, according to 2005 data.
The deal was a triumph for global business over economic nationalism. Luxembourg Prime Minister Jean-Claude Juncker, backed by France, initially vowed to fight it, and Arcelor CEO Guy Dolle said Mittal's bid was paid for with "Monopoly money".
But Luxembourg Economics Minister Jeannot Krecke praised the outcome, saying the decision-making centre would remain in the Grand Duchy and the government would consider later whether to take cash or shares for its 5.6 per cent Arcelor stake.
Mittal's board convened in London to ratify the new terms. Talks had continued over the weekend on the price Mittal would have to pay to win over Arcelor's board. Its earlier offer in May was 23 billion euros, or 35.37 euros per share.
Arcelor will have to pay a 130 million euro penalty to disengage from Severstal. The Russian company, which according to a source on Saturday secured a multibillion-euro loan facility from investment bank ABN AMRO to give itself fire-power, had no comment on the deal.
Last month, Arcelor proposed merging with Severstal in an arrangement under which Mordashov would buy a significant minority stake in the Luxembourg group.
Severstal improved the terms of this proposed merger last week, saying it would settle for a 25 per cent stake in the combined group and argued it was offering to improve its original deal by 2 billion euros to Arcelor shareholders.
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