SRE has adopted the principle that, in transactions involving an indirect acquisition of control of Brazilian listed companies, whose shares of both companies involved present proven liquidity in public markets, calculation of the portion of the price to be paid for the shares of the controlling company, which corresponds to the shares of the controlled company that was indirectly acquired, must, as a rule, be grounded on market price criteria for the shares of both companies involved. The quotations of such shares must be those of the moment that is publicly disclosed the event that triggers the tender offer. This criterion, as per the technical staff view, must prevail either for a tender offer caused by an indirect selling of control, as set forth by Section 254-A of Law 6.404/76, or in the case of a by-laws clause that imposes equal treatment, as it happens of the Brazilian Tender Offer.

Also in the technical staff opinion, such criterion applies generally to every indirect transfer of control transaction, unless - and observed herein the principles of good faith, both as to the offeree and as to the intermediary institution - stated otherwise within the contractual agreements or the documentation that supported the original deal (which has given cause to the obligation of launching a tender offer in Brazil). Additionally, in the case the agreements or documentation indicate an alternative criterion or method of mandatory tender offer price calculation, these ones must be fully proven and likely to be accepted as a basis for a tender offer.

As a result, after analyzing all the documentation presented in conjunction with the final offer for Arcelor S.A ("European Offer"), it could be concluded that: (i) there is proven liquidity for the shares of Arcelor S.A. and of Arcelor Brasil S.A., and (ii) there are no elements that could indicate that Mittal has used EBITDA (the method proposed within Brazilian Tender Offer), or any other formal standard that could have supported the price fixed for the European Offer, and that could be accordingly used as a basis for the Brazilian Tender Offer.

Therefore, the SRE issued a letter with the final requirements, defining that, in order to assure equal treatment provided for by the Arcelor Brasil S.A. by-laws, the price calculation of the Brazilian Tender Offer must consider: the closing price for both shares of Arcelor S.A. and of Arcelor Brasil S.A. in the main public markets where each of them are traded - respectively Euronext and Bolsa de Valores de São Paulo - in June 23, 2006, which was the day before the European Offer was announced. This is the record date that settles, at market price, the portion of the price of the European Offer that corresponded, at that time, to the shares of Arcelor Brasil S.A. owned by Arcelor S.A. (according with the holdings informed by Mittal in the process conducted by the CVM).

Considering that the Brazilian Tender Offer was supposed to be launched at the same date the European Offer was announced, even under the condition that this later succeeded, the SRE also determined that the partial exchange alternative for Mittal’s shares must take into account the amount of Mittal’s shares offered in the context of the European Offer. It should be observed herein the proportion mentioned in the previous paragraph, without any modification, be they positive or negative, caused by eventual variations on the market price of such shares after the conditions of the European Offer were announced.

1. In addition, and for the same reasons stated above, the SRE understood, as to the exchange portion of the price that needs to be extended in the Brazilian Tender Offer that: as the Mittal's shareholders and, accordingly, also the former shareholders of Arcelor S.A., have received dividends after the settlement of the European Offer, an adjustment needs to be made in order to assure that the shares offered are increased to reflect the value of the dividends paid;
2. As to the cash portion of the Brazilian Tender Offer - resulting from the conversion, from Euros to Brazilian Reais, of the price that was paid as of the date of the settlement of the European Offer - it must be adjusted for monetary correction up until the settlement date of Brazilian Tender Offer.

Grounded on the reasons stated above, the SRE understands that the price for the Brazilian Tender Offer must be, for each share of Arcelor Brasil S.A., of €$ 4,60, as to the cash portion, and of 0,3931 Mittal share, as to the exchange portion. As of today, the total estimated price, in Brazilian Reais, for each Arcelor Brasil share, is R$ 47,90, taking into account: (a) the closing price of Mittal shares at 09.02.2007; and (b) the adjustments caused by the dividends announced by Mittal, as mentioned before. Such estimation does not encompass any increment due to monetary correction as for the cash portion.

Finally, the SRE clarified that, as the Brazilian Tender Offer is mandatory, it could not be accepted any limitation for adherence to the offer based on the place of residence of minority shareholders, unless the offeror makes a fully-cash alternative offer, that at least assures equal treatment, as compared to the exchange offer. In other words, the amount of money, in such case, must be equal to the price of the exchange offer carried out in Brazil, as of the date of its settlement.

Considering also the importance of the questions herein raised to the price formation of Arcelor Brasil S.A. shares in public markets, the CVM has decided to disclose its staff amendment letter.

Click here in order to see the SRE’s letter (in Portuguese).