Russian white knight

22 May 2006 By Hugo Dixon Follow @hugodixon

There s nothing wrong with exploring alternatives like buying Russia s Severstal. But shareholders must be given a say. What s more, the scheme being considered with the Russian group isn t likely to create as many synergies and raises thorny questions.

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Arcelor is considering acquiring Severstal, a Russian steel group, to thwart Mittal Steel's hostile bid, according to a person familiar with the situation.

The acquisition of Severstal, a $7bn quoted company controlled by Alexei Mordashov, is one of two transactions being actively explored by Arcelor. A deal would result in Mordashov owning a large minority stake in an enlarged Arcelor.

There is no certainty of any alternative transaction materialising, the person familiar with the situation cautioned. But if it did, it might happen as early as this week. Arcelor shareholders would be given a say on any transaction.

Last week Mittal increased its offer by 34% and promised to abandon its twotier voting system which gives the Mittal family more votes than their economic interest.

The Arcelor supervisory board, which met on Sunday, said it wished to examine Mittal Steel's business plan. It also reiterated the management board's mandate to present it with alternative options.

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