Rotterdam (Netherlands): Courts in the Netherlands and France on 28 August refused to grant injunctions blocking the $41 billion merger between steel giants Mittal Steel Co. NV and Arcelor SA.
Legal action launched in Rotterdam by three hedge funds and in Paris by an activist shareholder were both rejected by judges, clearing hurdles to the creation of the world’ largest steel maker, as measured by sales.
The steel companies already call themselves ArcelorMittal, but three funds — SRM Global Master Fund Ltd, Trafalgar Catalyst Fund and Trafalgar Entropy Fund — went to court last week seeking to block the first phase of the two-step merger that will combine Rotterdam-based Mittal with ArcelorMittal SA, a Luxembourg holding company.
In the second phase, ArcelorMittal would merge with Luxembourg-based Arcelor, likely before year’s end, creating the world’s largest steel maker by sales.
Rotterdam Court judge A A Rijperman agreed with Mittal lawyers she did not have jurisdiction in the case because ArcelorMittal and Arcelor are based in Luxembourg.
“The plaintiffs will be able to fight the second phase of the merger in Luxembourg,” Rijperman said. “There is no way an injunction can take measures in what will be a Luxembourg matter.”
In a brief reaction, ArcelorMittal welcomed the ruling.
“We have always been convinced that the merger process was transparent and fair to all shareholders in both companies,” the company said.
The hedge funds’ legal team argued that the two-step merger was designed to sidestep Dutch courts, which it said were generally more sympathetic to activist shareholders than courts in Luxembourg.
The funds also claimed they were short-changed because they did not take up an initial offer in August 2006 that would have given them 11 ArcelorMittal shares for seven Arcelor shares.
After most shareholders took advantage of the offer, it was revised in May to eight ArcelorMittal shares for seven Arcelor shares.
“We are only getting 3.3% of a valuable company, and we should be getting 4.4%,” Philip Price, chief operating officer of SRM Global, had told reporters.
The funds said the difference in the exchange ratio would cost them $207 million.
Because the court ruled the case would best be dealt with in Luxembourg, it did not consider the issue of the different exchange ratios.
In France, an injunction request by an activist shareholder also upset by the change in the share swap ratio was rejected, as well.
Philip Price, chief operating officer of SRM, said the hedge funds were “actively considering their options to appeal.”