LAWFUEL – Law News Network – Cleary Gottlieb advised long-time client Mittal Steel in its unsolicited but ultimately recommended bid for Arcelor, which was first announced on January 27, 2006 and culminated in the announcement on July 26 that approximately 92% of Arcelor’s shares had been tendered into Mittal Steel’s €26.6 billion offer. Settlement of the offer will occur on August 1, with a subsequent offering period to close in mid-August and settle in early September. The combined entity, Arcelor Mittal, will be, at 100 million tons of steel shipped per year, the world’s largest steel company, more than three times larger than its closest rival.
This transaction attracted a great deal of media attention for reasons including the initially hostile nature and the prolonged (five month) and hard-fought takeover battle; the nature and histories of the companies involved; political considerations (Arcelor results from the combination of three European steel companies and operates in a symbolic and politically-charged sector, and several governments initially expressed opposition to or reservations about the bid); and the role of shareholder activism and importance of corporate governance considerations in the takeover battle.
The transaction was extremely complex from the regulatory perspective. The terms and documentation of the offer required the approval of the Belgian, French, Luxembourg and Spanish securities regulators since Arcelor is listed on markets in all four jurisdictions. The applicable regulatory framework for the bid therefore had to be constructed sui generis since the European Takeover Directive had not yet been implemented in the relevant jurisdictions. The share offering prospectus required the approval of the Dutch securities regulator as Mittal Steel is a Dutch company, and the offering was registered with the SEC (among other reasons because Mittal Steel’s shares are NYSE-listed). Antitrust filings were necessary in the EU, U.S., Canada and various other jurisdictions around the world. The transaction was further complicated by Mittal Steel’s agreed on-sale for approximately C$5.6 billion to Thyssen-Krupp of Dofasco, a Canadian steel company acquired by Arcelor after a prolonged take-over battle that ended just before the launch of Mittal Steel’s bid and the possibility that Mittal Steel might have to launch an offer to buy out the minority interests in Arcelor’s listed Brazilian subsidiaries for over €3 billion.
In addition to clearing the regulatory hurdles, Mittal Steel had to overcome a wide array of defensive measures employed by Arcelor. These included: a concentrated effort to obstruct or delay the necessary regulatory approvals; the placing of Dofasco into a stichting (a Dutch foundation), the unanimous approval of whose board is required for any sale of the company; and the signing an agreement with the controlling shareholder of Severstal, a Russian steel company, providing for the acquisition of a controlling interest in Arcelor without a premium or a subsequent mandatory bid, subject only to antitrust approval and the veto of 50% of the total outstanding share capital (where historical EGM attendance averaged around 35%).
Mittal Steel overcame each of these hurdles. The regulatory approvals were obtained after months of protracted effort and negotiation. The Dofasco stichting proved non-dissuasive. A shareholder revolt led to the withdrawal of the proposed share buyback and undid the Severstal stitch-up, which was ultimately rejected by 60% of total outstanding shares at an EGM. Mittal Steel continued to seek negotiations with Arcelor’s Board throughout the process with the goal of obtaining a recommendation, which it did on June 25 after having seen off the various defensive measures, revising its offer on two separate occasions and signing a Memorandum of Understanding relating, among other things, to revised offer terms and corporate governance matters.
Cleary Gottlieb is acting as sole transaction counsel to Mittal Steel and handling all aspects of the transaction, working with local counsel in various jurisdictions (principally Luxembourg, Spain and the Netherlands).
Practice Groups: Antitrust and Competition – European, Antitrust and Competition – U.S., Belgian Law, Corporate Governance, French Law, Mergers, Acquisitions and Joint Ventures
