Arcelor management''s attempt to push through the merger with Severstal by modifying the voting requirement by shareholders has enraged many influential minority shareholders. They allege that such a merger would put Russian steel tycoon Alexei Mordashov in control of the merged entity and would help the current Arcelor management to hold on to its positions for 5 years.

A Spanish shareholder who holds more than 3 per cent of Arcelor has asked the current Chairman and CEO of Arcelor to step down for ignoring shareholder views. He has come up with a new plan under which Arcelor would make a cash and stock bid for Severstal, instead of the all stock merger currently under consideration. The Arcelor board is reportedly meeting today to consider this proposal.

French minority shareholder groups like ADAM and institutional investor advisors like ISS have also advised Arcelor shareholders to vote against the Severstal deal. Arcelor''s management was also forced to cancel a board meeting to consider a controversial share buy-back scheme, which was widely criticised by analysts and shareholder groups as a waste of resources.

In an interview to The Wall Street Journal, Mittal Steel CEO Lakshmi Mittal had stated that he was getting increasingly confident that Arcelor shareholders could be convinced to back his offer after the Arcelor board meeting was cancelled.

The growing resistance to Arcelor-Severstal merger has also forced Severstal to come out with revised merger conditions yesterday. Under the revised proposal, Alexei Mordashov would hold only 25 per cent of the merged entity as against 32.5 per cent under the original plan and would have much lower influence over future business strategy.

Meanwhile Guy Dolle, CEO of Arcelor, has indicated that the Arcelor board is expecting a higher bid from Mittal. Representatives of Mittal Steel and Arcelor have already concluded ''many rounds'' of talks, according to the Arcelor CEO.

Though Mittal Steel has denied that it is considering a higher bid, most analysts and fund managers expect such an announcement before the end of this month. The Arcelor management would not have much of a choice in such a scenario and would be forced to recommend the Mittal Steel offer to shareholders.