updated 6/29/2006 1:42:48 PM ET 2006-06-29T17:42:48

Arcelor SA’s shareholders are expected to rule Friday on a key hurdle to Mittal Steel Co.’s hard-fought acquisition of the company as they decide whether to block a rival agreement with OAO Severstal.

Arcelor yielded to Mittal’s $31.92 billion offer Sunday, ending a bitter five-month battle and jilting Russian partner Severstal.

The quickest and easiest way for Mittal’s own offer to proceed is for more than 50 percent of the shareholders to vote Severstal down on Friday. Mittal took out newspaper ads last week, calling on investors to turn up and speak out.

The Severstal deal can also be derailed if Mittal manages to buy at least 50 percent of Arcelor shares before its offer closes in mid-July, or if Arcelor convinces Severstal to back out voluntarily.

But a few more weeks of uncertainty could allow Severstal to bid for all of Arcelor — an offer Arcelor said it would have to consider.

Severstal Chairman Alexei Mordashov has ruled out a three-way merger with Mittal and Arcelor, whose largest single holder is the Luxembourg government.

Severstal issued a statement Thursday saying it had made no final decision on its next move and it was examining all its options regarding Arcelor. Severstal did say that it still considers its deal “binding and unterminated.”

Some Arcelor shareholders, angry at the unusual “veto-vote” on Severstal, had earlier demanded Friday’s meeting be postponed and another be called to approve the deal with a two-thirds majority. Shareholders will also vote on this proposal.

Shareholders already can take some credit for Arcelor’s about-turn in accepting Mittal’s offer. They have flexed their muscles several times, pressing the company to drop plans to buy back shares and demanding more right to be consulted on decisions made by the board.

Arcelor’s board last month pitched a plan to swap a 32 percent stake in the company for Severstal’s steel assets as a “friendly” merger that would bring more benefits — and higher earnings — than a tie-up with Mittal.

But shareholders cooled when it became clear that Arcelor was also planning changes to the way the company was structured. Mutterings of a shareholder rebellion — some of it encouraged by Mittal — gained momentum in recent weeks when holders who had earlier backed Arcelor’s board demanded it scrap the Severstal deal.

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