Steel Group Arcelor Mittal Victim Of Dofasco 'Poison Pill'

Nov. 13, 2006
The decision to block the sale could have repercussions for other Arcelor Mittal activities in North America.

Arcelor Mittal, the newly merged steel group, said Nov. 13 it had been prevented from selling Canadian producer Dofasco, formerly a unit of Arcelor, to ThyssenKrupp of Germany. The deal had been agreed between Mittal and ThyssenKrupp earlier this year when Mittal was battling to take over its smaller rival Arcelor.

"Arcelor Mittal has been informed that the directors of the Strategic Steel Stichting, the Dutch foundation that holds the shares of Dofasco, decided on November 10 not to dissolve the foundation, which would have permitted the sale," Arcelor Mittal said.

This type of initiative is called a "poison pill", a mechanism designed to cause inconvenience with the aim of dissuading a predator company from launching a takeover bid.

Arcelor bought Dofasco for 4.0 billion euros (US$5.1 billion) in January, beating ThyssenKrupp in a bidding battle for the highly profitable Canadian group.

Some analysts said that the refusal of the foundation to agree to a sale of ThyssenKrupp served the purposes of the Arcelor Mittal management. "Dofasco is a strength in the industrial portfolio of Arcelor Mittal. Dofasco is going well and represents vertical integration with its iron ore mines and access to Japanese car manufacturers in the U.S.," the analyst said.

ThyssenKrupp said it would do everything possible to conclude the acquisition of Dofasco.

The decision by the Dutch foundation to block the sale could have repercussions for other Arcelor Mittal activities in North America. Arcelor Mittal said it would be in contact with the U.S. Department of Justice. Approval of the merger of Arcelor and Mittal Steel, which created by far the biggest steel producer of the world, was given by the U.S. Department of Justice on condition that the group divested Dofasco or activities of a similar size to avoid creating a dominant position in the U.S. market.

Copyright Agence France-Presse, 2006

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