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Arcelor Shareholders Try Blocking Mittal Buyout

Three hedge funds want to stop first phase of $40 billion deal under which Mittal is to combine with ArcelorMittal SA, a holding company.

ROTTERDAM, Netherlands (AP) — Three investors in steel giant Arcelor SA asked a Dutch court Wednesday to block the company's proposed $40 billion takeover by Mittal Steel Co. NV, saying that revised terms have cost them $205 million.
 
The steel companies already call themselves ArcelorMittal, but three hedge funds — SRM Global Master Fund Ltd., Trafalgar Catalyst Fund and Trafalgar Entropy Fund — want to block the first phase of the deal under which Mittal is to combine with ArcelorMittal SA, a holding company.
 
Under a takeover offer made in August 2006, investors were offered 11 ArcelorMittal shares for seven Arcelor shares. But the bid was revised in May to offer eight ArcelorMittal shares for seven Arcelor shares.
 
''We are only getting 3.3 percent of a valuable company and we should be getting 4.4 percent,'' Philip Price, chief operating officer of SRM Global, told reporters after the hearing at Rotterdam Court.
 
Rotterdam-based Mittal plans to seek shareholder approval for the deal on Aug. 28 and complete it on Sept. 3. In the second phase, ArcelorMittal would combine with Luxembourg-based Arcelor, creating the world's largest steel maker by sales.
 
The Rotterdam court will issue its written decision Monday on whether to block the deal, a day before the shareholder meeting.
 
Price said the hedge funds involved in Wednesday's hearing hold ''in excess of 1 percent'' of the company's capital.
 
Mittal lawyer Harmen de Mol van Otterloo said the Dutch court had no jurisdiction because under the complex structure of the deal will involve two Luxembourg-based companies.
 
However, hedge fund lawyer Jurjen Lemstra argued that the two-step merger was designed to sidestep Dutch courts, which he said were generally more sympathetic to activist shareholders than courts in Luxembourg.
 
Wednesday's hearing is the latest hurdle Arcelor and Mittal have faced in their quest to merge and create a company that will control around 10 percent of global steel production.
 
Brazilian authorities forced Mittal to pay more for Arcelor's Latin American units, adding nearly 4 billion euros ($5.43 billion) to the cost of the deal, and the companies had to sell plants in Europe and the U.S. to win regulatory approval.