European steel maker Arcelor is set to merge with Mittal Steel after accepting an improved €25.6 billion ($32.2 billion) takeover offer from its rival, ending a five-month battle over the firm.
If approved by shareholders, the merger of the world's two largest steel companies will create a vast enterprise that will control ten per cent of the global steel market and produce three times as much steel as its nearest rival.
Arcelor's decision to approve the deal marks a significant turnaround by its board, which had previously resisted takeover moves from Mittal, which is owned by the Indian-born billionaire Lakshmi Mittal.
The company’s management had proposed a merger with Russian steel firm Severstal in order to block a Mittal deal, but a number of Arcelor shareholders had voiced concern about moves to join with the firm, run by steel magnate Alexei Mordashov.
Following a nine-hour meeting between Arcelor's board members yesterday, the company announced that it had decided to accept a merger with Mittal after the world's largest steel firm upped its offer by ten per cent.
Reports suggest that Mittal raised its offer to 40.37 euros per Arcelor share from the previous 37.74 euros per share it had bid, but full details of the proposed deal have yet to be announced.
Emerging from the talks over Arcelor's future, the company's chairman Joseph Kinsch told reporters that the firm's board had "unanimously" decided to back Mittal's offer.
The new company – to be known as Arcelor-Mittal – will be based in Luxembourg and is expected to have a joint turnover of some €55 billion.
Welcoming Arcelor's acceptance of its proposed takeover offer, a spokesman for Mittal said: "We have always sought a recommended merger in the interests of all stakeholders. We are delighted that is what we have now achieved."
But rival bidder Severstal, which is set to receive €130 million compensation from Arcelor following the company's decision to pull out of their merger agreement, warned that it might mount a legal challenge to the Mittal deal.
"We have a legal, binding merger agreement that the board of Arcelor entered into. In light of this we are very surprised that the board did not invite us to discuss our revised proposal nor offer us an opportunity to respond as we had requested," said Severstal in a statement.
"We are now reviewing all of our options," the company added.
Arcelor, which rejected the first €25.8 billion euros ($32.3 billion) takeover offer made by Mittal in January, proposed a merger with Severstal last month as part of a deal which would have seen Russian oligarch Mr Mordashov buy a significant minority stake in the Luxembourg group.