514 18 Takeover Defences
proceedings as a defence. The same can be said of the principle of home-country
control in regulated industries.
Furthermore, the EU legal capital regime regulates the disclosure of informa-
tion to shareholders and makes many transactions subject to shareholder consent.
It can therefore be easier for shareholders to block transactions depending on the
law governing the company. For example, the wide powers of shareholders under
German company law have recently been constrained in order to prevent abusive
litigation.
18.11 Example: Arcelor and Mittal
The Directive on takeover bids has an effect on takeover defences. Its effect can
be illustrated by the case of Arcelor and Mittal Steel. The takeover defences ap-
plied by the board of Arcelor were not fully compatible with the provisions of the
Directive on takeover bids.
Parties. The main parties of the case were Arcelor, Mittal Steel, Dofasco, and
Severstal. One can say that Arcelor and Mittal Steel competed for the position as
the largest steel producer and the domination of world steel markets. (a) In 2006,
Arcelor was a “Société Anonyme” (SA, limited-liability corporation) incorporated
under Luxembourg law. Arcelor shares were listed on the Luxembourg stock ex-
change as well as on the Euronext Brussels, Euronext Paris, and in the four Span-
ish stock exchanges. Arcelor was created by the merger of Aceralia, Arbed, and
Usinor. According to Arcelor, Arcelor was the number one steel company in the
world. (b) Mittal Steel was a “naamloze vennootschap” (N.V., limited-liability
corporation) incorporated under Dutch law. Mittal Steel’s shares were listed on the
New York and Amsterdam stock exchanges. In early 2006, Mittal Steel was con-
trolled by Lakshmi Mittal, an Indian-born but London-based tycoon and one of the
richest people in the world. According to Mittal Steel, Mittal Steel was the world’s
largest and most global steel company. (c) Dofasco was a large North American
steel company. (d) Severstal was a Russian company controlled by Alexey Mor-
dashov, a billionaire with close relations with Vladimir Putin who was the Russian
president at the time. Severstal was the largest Russian steel producer. In addition,
Severstal owned Severstal North America, the fifth largest integrated steel maker
in the US, and Lucchini, Italy’s second largest steel group.
Arcelor/Dofasco. On 30 December 2005, Arcelor made a bid for Dofasco. Af-
ter increasing its bid on 16 January 2006, Dofasco and Arcelor reached agreement
on 24 January 2006. Dofasco’s Board of Directors decided to recommend to Do-
fasco shareholders that they accept Arcelor’s offer. During March and April 2006,
Arcelor acquired 100% of the shares of Dofasco.
Mittal/Arcelor. On 27 January 2006, Mittal Steel made an unsolicited offer of
€18.6 billion in cash and shares for Arcelor. Under the terms of the deal the family
of Lakshmi Mittal would keep a controlling stake in the merged company. The
original bid was valid till 28 April 2006. A Letter Agreement dated 26 January
2006 between Mittal Steel and ThyssenKrupp, a German company, provided that,