Arcelor SA, long fighting a hostile bid from Mittal Steel Co, said on Friday that it reached a deal that would give it a controlling stake in Russia’s largest steelmaker Severstal and $1.59 billion in cash in exchange for 32 per cent of Arcelor.Mittal Steel Co immediately criticised the deal as a ‘‘second-class combination,’’ saying Arcelor’s board seemed to be manipulating shareholders to their own ends.Arcelor fought hard against Mittal’s bid, complaining about the company’s corporate governance. Arcelor also said that Mittal’s original offer of $23.75 billion undervalued the company. Mittal had offered to raise its bid to $33 billion last week.Under the deal announced on Friday, Severstal’s controlling shareholder Alexei Mordashov will pay Arcelor $1.59 billion in cash and give it his stake in all of Severstal’s steel assets and Italian steelmaker Lucchini SpA, according to an Arcelor statement.In exchange, Mordashov will own 32 per cent of the enlarged Arcelor group. Existing shareholders, who will own the remaining 68 per cent, can vote on the deal at a shareholders’ meeting next month.Arcelor Chief Executive Guy Dolle said the deal— worth $56.12 per share, excluding a planned $2.36 per share dividend — represents the ‘‘real value’’ of the company. Mittal has offered $48.19 a share.Arcelor said the transaction would go through by the end of July unless shareholders representing more than half the company’s capital vote against it on June 28. Some 35 per cent of Arcelor shareholders usually attend meetings.Dolle expressed confidence that shareholders would approve the bid.Mittal said this kind of move was unprecedented and prevented shareholders from having a real choice in the future of the company. ‘‘Arcelor’s shareholders are being forced to hand over control of their company, whilst being denied a premium,’’ it said in a statement.Mordashov has agreed not to vote against Arcelor’s board. He has also promised to launch a cash offer at fair value if he goes over 45 per cent of Arcelor share capital, Arcelor said in documents for investors posted on its Web site.However, Arcelor said Mordashov would not be allowed to buy any more Arcelor shares for four years and could not offload the bulk of his shares for five years, although he would be allowed to sell off up to 5 per cent after two years.The deal will be called off if Mittal manage to acquire more than 50 per cent of Arcelor’s equity before its offer closes. If either Arcelor or Mordashov back out, they will have to pay a $178.6 million break-up fee.Mordashov called the deal a ‘‘breakthrough’’ for his company and the Russian industry’s international image. Severstal has grown rapidly in the past decade and has holdings in the US as well as Italy, but its bid for Arcelor raises its profile.‘‘It’s a new culture for us Russians, it’s a big step forward,’’ Mordashov said. ‘‘With Russian participation, and a big chunk of Russian capital, a huge and undisputed leader in world steel market is being created.’’Analysts say the global steel industry is ripe for consolidation, and the proposed Mittal-Arcelor hookup accelerated discussions across the world’s major steel companies.Mordashov said the Mittal offer had been a ‘‘catalyst’’ for his deal with Arcelor, though Dolle insisted that his company and Severstal had been in talks since 2002.Under the planned terms, Arcelor Chairman Joseph Kinsch and Dolle would keep their posts in the company to remain based in Luxembourg. Mordashov would become non-executive president of Arcelor’s board of directors and would have the right to nominate six out of 18 board members.
