18.11 Example: Arcelor and Mittal 515if Mittal Steel were successful in its tender offer for Arcelor and able to exert
management control “with the ability to sell Dofasco”, Mittal Steel would cause
Arcelor to sell Dofasco to ThyssenKrupp.
Board reaction. On 29 January 2006, that is, two days later, Arcelor’s board re-
jected the offer. Arcelor’s chief executive described in public the bid as “150%”
hostile. He also drew a contrast between Mittal and Arcelor's “European cultural
values” (even though the bidder was a Dutch company based and listed in the
Netherlands and controlled by a London-based tycoon). He claimed that Arcelor
was producing “aristocratic perfume” whilst Mittal was making “plebeian eau de
cologne”, and refused to accept that there could be any industrial logic to the take-
over plan. He even said that he did not want his shareholders to be paid with the
Indian-born Lakshmi Mittal’s “monkey money”.^52
According to the Directive on takeover bids, however, Arcelor’s board should
have acted in the interests of the company as a whole.^53 Arcelor’s shareholders
should have been given sufficient information to enable them to reach a properly
informed decision on the bid,^54 and the board should have drawn up and made
public a reasoned opinion of the bid.^55
Divestment of Ugitech. On 10 March 2006, Arcelor entered into an exclusivity
agreement for the sale of 100% of its stainless long products subsidiary Ugitech, a
French company, to Schmolz Bickenbach AG. Ugitech sold 200,000 tons of prod-
ucts every year. Arcelor produced tens of millions of tons.
In principle, the sale of a subsidiary could have been part of a crown jewels de-
fence that would have required shareholder consent. However, in this case the sale
was not prohibited by provisions implementing the Directive on takeover bids as it
was not likely to frustrate the bid.^56 Ugitech was a tiny company compared with
Arcelor as a whole.
Financing of defensive measures. In March and April 2006, Arcelor took de-
fensive measures. Arcelor started by raising funding. On 30 March 2006, Arcelor
signed a €4 billion Term Loan Facility with a 3 year maturity. Arcelor did not
make this loan facility publicly known at the time.
It is important to note that the main rule under the Market Abuse Directive is
that issuers must publish information which would be likely to have a significant
effect on share price^57 but do not have to make public information which is not
likely to have such an effect. Taken out of context, the term loan facility might not
have triggered a disclosure obligation under the Directive on market abuse. How-
ever, if the term loan facility had formed part of the defensive measures employed
by Arcelor, it should have been disclosed.
The purpose of the term loan facility soon became clear as Arcelor’s board dis-
closed some defensive measures on 3 April 2006. On 26 April 2006, Arcelor fi-
(^52) Arcelor, up in arms, The Economist, April 2006.
(^53) Article 3(1)(c) of Directive 2004/25/EC (Directive on takeover bids).
(^54) Article 3(1)(b) of Directive 2004/25/EC (Directive on takeover bids).
(^55) Article 9(5) of Directive 2004/25/EC (Directive on takeover bids).
(^56) Article 9(2) of Directive 2004/25/EC (Directive on takeover bids).
(^57) Article 6(1) of Directive 2003/6/EC (Directive on market abuse).