Arcelor accepts Mittal takeover

European steel maker Arcelor has accepted an improved takeover bid from Mittal Steel to create a steel giant three times larger than any rival, sources said yesterday.

Arcelor and Mittal, already the world's two largest steel producers, have held talks to end a bitter five-month feud over Mittal's unsolicited plans to acquire its rival and create a global giant with an annual output of over 100 million tonnes.

After a five-month takeover battle involving an Indian-born billionaire, a Russian oligarch and governments across western Europe, the sources told Reuters that Arcelor's board voted unanimously for Mittal's revised offer.

There was no immediate confirmation from either company.

The marathon board session had to decide whether to give in to Mittal's advances or back a merger arranged by Arcelor's management with Russia's Severstal, controlled by steel magnate Alexei Mordashov.

The revised bid by Mittal, controlled by London-based Lakshmi Mittal, the world's third richest man, valued the European steelmaker at €40.37 a share or €25.8 billion ($32.46 billion), a source close to the situation said.

That was 15 per cent above Arcelor's last traded price before its shares were suspended last Thursday, and 45 per cent above the original value of Mittal's first offer, unveiled in January.

Mittal's board had also convened in London to ratify the new terms, the sources said, adding that the two companies would announce they had reached a deal after the respective meetings.

If the deal goes through, it will be a triumph for global business over European economic nationalism. Luxembourg Prime Minister Jean-Claude Juncker, backed by France, initially vowed to fight it, and Arcelor chief executive Guy Dolle said Mittal's bid was paid for with "Monopoly money".

The combined company would produce about 10 per cent of the world's steel.

Arcelor will have to pay a €130 million penalty to disengage from Severstal if it accepts Mittal's terms.

Last month, Arcelor proposed buying the Russian firm in a deal in which Mordashov would buy a significant minority stake in the Luxembourg group.

Severstal improved the terms of this proposed merger last week.