Luxembourg: European steel maker Arcelor unveiled a profits leap and a near doubling of its dividend on Thursday to ward off a hostile takeover bid by Mittal Steel which Arcelor said 'seriously undervalues' the group.
The company proposed an 85-per cent increase in its dividend payment to 1.20 euros per share from 0.65 euros in 2004.
Arcelor Chairman Guy Dolle, commenting on suggestions that his group had offered the high dividend as a sweetener to its shareholders, said the figure included 'no exceptional element'.
In a conference call later, Dolle hailed the 'fantastic results' of his company, saying it demonstrated efficient operations.
Arcelor's strong performance contrasted with a 28.0-per cent fall in profits by Netherlands-based Mittal Steel, announced on Wednesday.
Companies subject to hostile takeover bids occasionally increase their dividend to convince shareholders to support the existing management and reject takeover terms.
In trading on the Paris stock exchange, the price of shares in Arcelor rose by 0.37 per cent to 29.90 euros, while the CAC 40 index of leading shares closed 0.79 per cent higher at 4,973.09.
Arcelor said it had generated a 66.0 per cent rise in net profit to 3.846 billion euros ($4.569 billion) in 2005 and forecast a 'very good year for the steel industry' in 2006.
In January, Mittal Steel sprang an 18.6-billion-euro hostile takeover offer for Arcelor in an attempt to create a sector giant that would control about 10 per cent of the global market.
In an statement issued by Arcelor along with the results, the company said the cash-and-share bid by Mittal Steel 'seriously undervalues' Arcelor, adding that it had 'excellent prospects for development'.
Sales in 2005 rose by 8.1 per cent to 32.611 billion euros.
Dolle has been an outspoken critic of both the takeover offer and the chief executive and controlling shareholder of Mittal Steel, Indian billionaire Lakshmi Mittal.
However, in an apparent softening of his position, he told French newspaper Le Figaro in an interview published on Thursday that if the takeover offer were all in cash, then the Arcelor board would have to consider it.
A sector analyst in Paris said: "This is not a realistic scenario."
A source close to Mittal said: "It is not foreseen at this point to pay more, nor to put more in cash because the market and (Arcelor) shareholders say 'this is fine with us'."
Arcelor's strong results nonetheless highlighted the differing fortunes of the two companies last year.
On Wednesday, Mittal Steel said its net profit had slumped by 28.0 per cent in 2005 compared with 2004 to $3.365 billion. In the fourth quarter alone, Mittal said its net profit had fallen by 58.0 per cent to $650.0 million.
In contrast, Arcelor reported that its net profit had surged in the fourth quarter to 1.252 billion euros, from 820 million euros a year earlier.
Analysts underlined the groups' different strategies.
While Arcelor has focused on producing high-quality steel for specialised applications, Mittal Steel is seen as focusing on increasing the volume of its sales but from lower quality steel mills.
The strategy of Mittal Steel is seen as making it more vulnerable to pricing pressure from low-cost rivals in countries such as China, where Mittal has invested in production capacity.
Arcelor announced on Thursday, however, that it would also enter the Chinese market directly for the first time.
The acquisition of a minority stake in Chinese producer Laiwu, worth $224 million according to Chinese press reports, was 'imminent', Dolle said.
"Our favoured zones of growth are those where we are not active. It is not Western Europe, it is not North America," he added.
"What we are looking to do is grow in Brazil, in the former Soviet Union, in India and in China."
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