Arcelor's board termed the revised Mittal offer as 'inadequate' as it undervalues Arcelor. The board said the proposed Severstal merger is more attractive from a strategic, financial and social point of view.

Arcelor said it has set the price of the self tender for the merger with Severstal at €44 per share. The company said it would initiate the Severstal merger only after Mittal announces the result of its open offer to Arcelor shareholders.

However, Arcelor has mandated its group management board to meet with Mittal Steel to "review the improvements that Mittal Steel has offered to make to its current offer".

It is expected that in its meeting with Mittal, Arcelor would not accept any price less than €44 per share from Mittal. But such a high price may make the whole deal financially unviable for Mittal. Not only would Mittal have to find additional resources to finance a higher bid, any further debt or equity dilution would weaken its financial position when steel prices turn weak.

Most analysts expect Mittal to increase the cash component in its current offer, but would most likely keep the overall offer at the same level.

Arcelor continues to argue that there are significant differences in the business plans of the company and Mittal Steel. It said the business plan submitted by Mittal confirms that Mittal's strategy is mainly volume-driven while Arcelor's is margins-driven. The diverging business models would make the possible synergies from a Mittal - Arcelor merger lower than comparable deals.

To satisfy dissenting shareholders who have been mobilised by Goldman Sachs, Mittal's advisors, Arcelor has said that the Severstal deal does not preclude the Mittal bid. The Arcelor board said Mittal would not have raised its bid if Arcelor had not announced the Severstal deal.

Arcelor said the Severstal deal would unwind itself if Mittal manages to acquire a more than 50 per cent stake in the company. If Mittal's stake after the open offer is below 50 per cent, Severstal's owner Alexey Mordashow could unwind the deal. The company said shareholders have the option of voting against the Severstal deal in the meeting scheduled for end of this month and they can also express their preference for Mittal by submitting the shares in the Mittal offer.