Weakest link

30 Jan 2006 By Hugo Dixon

The steel giant is asking Arcelor shareholders to take $19bn of secondclass paper in exchange for their company. The fact that Mittal is a dynastic company that has yet to prove its global skills could become a big factor in this bitter battle.

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Guy Dolle, Arcelor's chief executive, said his company's corporate governance is on a different planet from that of Mittal, which has made a E19bn offer for Arcelor.

At present, the Mittal family has 88% of the shares and 97% of the voting rights in Mittal Steel. As part of the Arcelor transaction, the family has agreed to reduce the voting rights of the Ashares, which only it owns, from 10 times that of the B shares to two. After the transaction, the family would control 51% of the shares and 64% of the votes.

Mittal says it follows best practice in all matters of corporate governance, including a majority of corporate outsiders on its board of directors. It is registered in the Netherlands and files financial reports in the US. The president and finance director, Aditya Mittal, is the son of the chairman and chief executive, Lakshmi Mittal.

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