SAN FRANCISCO (AFX) - Mittal Steel Co advisers are trying to organize a group of Arcelor SA shareholders to thwart the Luxembourg-based company's planned merger with Russia's OAO Severstal, the Wall Street Journal reported on Sunday.
Shortly after Arcelor announced its deal with Severstal, Mittal's investment bank Goldman Sachs began soliciting Arcelor shareholders to sign a letter that would call for an extraordinary shareholders' meeting to try to make the deal subject to shareholder approval, the newspaper said.
Goldman, along with a law firm, continued to rally support through the weekend but by Sunday afternoon had yet to tally at least 20% of Arcelor shareholders, a threshold needed to convene such a meeting, the WSJ added, citing unidentified people familiar with the matter.
Arcelor, currently the world's second-largest steelmaker, has been trying to fight off a hostile takeover from Mittal, its bigger rival. On Friday Arcelor unveiled its white knight: Severstal, controlled by 40 year-old Russian billionaire Alexey Mordashov.
Mordashov agreed to contribute his 89.6% stake in Severstal's steel business, as well as Severstal's iron ore and coal assets, his stake in Italy's Lucchini, and 1.25 billion euros in cash in exchange for 32% of the enlarged Arcelor.
Arcelor shareholders get to vote for either Severstal or Mittal at a meeting scheduled for June 28.
However, Goldman has prepared a letter for disgruntled Arcelor shareholders to sign that objects to the way the company plans to gain investor approval for its Severstal deal, the Journal reported.
Arcelor plans to assume that shareholders approve of the Russian deal unless at least half of them vote against it, the letter said, noting that no more than 35% of investors have ever turned up to an Arcelor shareholder meeting, the newspaper reported.
Instead, the letter proposed that the approval procedure consist of a two-thirds majority vote of all shares present or represented at a properly convened extraordinary general meeting of shareholders, according to a copy that was posted on WSJ.com.
Wilbur Ross, the New York billionaire investor who sold his steel assets to the Mittal family in 2005 and is now a member of the Mittal board of directors, told the WSJ that more than 20% of Arcelor shareholders 'hate' the Severstal deal.
But he added that the agreement may have been unveiled just before Memorial Day weekend in the U.S. to hinder shareholders from organizing an objection.
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