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. Last Updated: 07/27/2016

Mittal Draws Its First Blood in Steel Battle

bloombergLakshmi Mittal on May 9
Mittal Steel on Tuesday hailed what it called its first major success in its tug-of-war with Alexei Mordashov's Severstal for European steel giant Arcelor.

Mittal took out full-page newspaper ads Tuesday in Britain's Financial Times and France's Les Echos that "strongly encourag[ed] Arcelor shareholders to exercise their veto right'' at a June 30 meeting.

If shareholders representing 50 percent of Arcelor's shares vote against Mordashov's deal, it will be canceled.

In the ads, Mittal claimed a tide-turning victory after Arcelor's board said Monday that it would postpone indefinitely a $6.5 billion share buyback offer that would have increased Mordashov's stake in Arcelor from 32.2 percent to 38 percent.

"The withdrawal of the share buyback offer is a real setback for Arcelor. For Mittal, it's a victory," said Francois de Rambuteau, a manager with Paris-based fund Cholet-Dupont Gestion, which has $2.3 billion in assets, including Arcelor shares. As an Arcelor shareholder, he was disappointed the buyback offer was dropped, Rambuteau said.

Last month, Mittal made an improved 25.8 billion euro ($32.4 billion) offer to buy Arcelor. Despite Arcelor's board backing a merger with Severstal, Mittal has continued to promote its takeover plans to Arcelor shareholders.

Tuesday's ads come a few days after the Financial Times ran a comment by Mordashov on its opinion pages that outlined the benefits of his offer.

A week earlier, on June 7, Mittal ran full-page cartoon ads in three European business dailies depicting gagged investors at a shareholder meeting. Arcelor responded the next day with a cartoon of its own in The Wall Street Journal and is running a series of cartoon ads in European newspapers.

A spokesman for Mittal said Tuesday's ads were the sole initiative of the company and had no Arcelor shareholder backing, although some investors say Mittal has already garnered support from shareholders with more than 30 percent of Arcelor's shares.

Some European investors said Mittal's chances of victory had increased due to the relentless publicity drive by the company's CEO and majority shareholder, Lakshmi Mittal.

"It's definitely a communications battle," Rambuteau said.

Many European investors feel uneasy because they know little about Mordashov and it has been "very easy for his opponents to associate him with some unclear businessmen in Russia," Rambuteau said. To rectify this, Mordashov needs much greater and immediate media and investor exposure, Rambuteau said.

A spokeswoman for Severstal Group, Olga Antonova, said Tuesday that the company did not have any plans to run ads of its own.