WEST PALM BEACH, FL (HEDGECO.NET) – Luxembourg-based Arcelor on Sunday succumbed to a $33.65 billion takeover by Mittal steel, in what some call a hostile takeover, after rejecting the Rotterdam company’s June offer.
The Arcelor Board of Directors, which consulted Morgan Stanley in connection with its financial aspects, had previously rejected Mittal Steel in its offer to combine the two companies. The synergies generated by the combination of Arcelor and Mittal Steel would have diverging business plans.
Some hedge funds that had been hoping to profit from the merger pulled out too early though, reducing their holdings just days before Mittal made its sweetened offer of $50.77 a share, a 7% improvement on Mittal’s previous offer and a 43% premium on the original bid.
Hedge funds holding Arcelor shares before Mittal’s initial offer have seen the price of the shares increase by about 83%. Arcelor shares surged by 9.9% when they started trading midmorning Monday.
A few hedge funds that did stay in the running with more than 5 million Arcelor shares included Westport, Conn.-based Heyman Investment Associates LP; Davidson Kempner European Partners LLP, an affiliate of New York-based Davidson Kempner Partners; and Highbridge Capital Management LLC, also of New York.
Arcelor had a turnover of 32.6 billion euros in 2005. The company, the number one steel producer in Europe and Latin America, has ambitions to further expand internationally in order to capture the growth potential of developing economies. They currently have holdings in over 60 countries.
For the deal to succeed with Mittal, Arcelor shareholders must vote on Friday against an alternative offer by Severstal, a Russian steel maker controlled by Aleksei Mordashov.
But some Arcelor shareholders spoke out against that transaction after they felt it was foisted on them without proper voting procedures. This helped to push Arcelor managers to reconsider their opposition to a deal with Mittal.
Alex Akesson
Contributing Writer
HedgeCo.Net
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