Shareholders vote against Severstal

Half of Arcelor shareholders today voted down a merger with Russia's OAO Severstal, clearing the way for Arcelor and Mittal Steel Co to form the world's largest steel-maker.

Shareholders owning 57.94 per cent of Arcelor voted against the deal, the vast majority of those who turned up for a shareholders meeting called to consult them on the merger after Arcelor yielded to Mittal's latest offer on Sunday.

Arcelor Chairman Joseph Kinsch said the date for closure of Mittal Steel's takeover offer for Arcelor had been extended from July 5 to July 12.

He also said: "Between the proposal from Mittal and the one from (Severstal head) Mordashov, the supervisory board did right in recommending the Mittal offer. If Mordashov makes a bid for Arcelor, shareholders will be delighted."

Kinsch added that the plan with Severstal had offered the best industrial strategy for Arcelor, but acknowledged that financial markets had "reacted badly" and that some Arcelor shareholders had also voiced strong opposition.

He said the plan for an alliance with Severstal had not been pulled "out of a hat", but had been in gestation for some time, and that a proposed deal had nearly succeeded two years ago. Late yesterday, Severstal said in Moscow that it was studying all options regarding Arcelor.

Meanwhile, stock market regulators in France, Belgium, Luxembourg, and Spain said they had asked Severstal to clarify its intentions as soon as possible. Last weekend, the Arcelor board did a backward flip by spurning Severstal and accepting improved terms from Mittal Steel.

Arcelor was formed of formerly state-owned interests in France, Luxembourg, Belgium, and Spain. The prospect that it might come under foreign control caused consternation, notably in France.