ThyssenKrupp AG of Germany has initiated summary legal proceedings against Mittal Steel Company N V. The proceedings were initiated in district court of Rotterdam on December 22 alleging Mittal Steel breached a January 26, 2006 letter of agreement between Mittal Steel and ThyssenKrupp with respect to sale of Dofasco Inc., the Canadian steelmaker to ThyssenKrupp.

ThyssenKrupp has alleged that Mittal Steel breached the letter of agreement by failing to cause Arcelor SA to initiate litigation against Strategic Steel Stichting, an independent Dutch Foundation which currently holds 89% of Dofasco’s shares, to force Stichting to transfer the Dofasco shares to Arcelor so as to permit their sale to ThyssenKrupp, a Mittal Steel statement issued from Rotterdam said..

The lawsuit seeks a court order directing Mittal Steel to cause Arcelor to commence summary proceedings in Dutch courts to force Stichting to return the Dofasco shares to Arcelor and impose a penalty of 500,000 euros per day for each day that Mittal Steel fails to do so.

The statement quotes Simon Evans, Mittal Steel’s general counsel as having said: “ThyssenKrupp’s suit is entirely without merit. Mittal Steel is very surprised and disappointed that ThyssenKrupp has initiated a lawsuit since Mittal Steel has taken all reasonable actions to comply with the letter of agreement and to obtain dissolution of Stichting. Moreover, ThyssenKrupp is well aware from ongoing discussions, neither Mittal Steel nor Arcelor has yet made a final decision regarding possible litigation against Stichting.”

“Mittal Steel is continuing to consider the possibility of litigation against Stichting with its Dutch legal advisors , although Mittal Steel has been advised that the prospects for success of such litigation are remote,” the Mittal Steel statement said.

Incidentally the January 26, 2006 letter of agreement between ThyssenKrupp and Mittal Steel had said that if Mittal Steel was successful in its tender offer for Arcelor and was able to exert management control “with ability to sell Dofasco,” Mittal Steel would cause Arcelor to sell Dofasco shares to ThyssenKrupp.

During March-April 2006, Arcelor acquired 100% of Dofasco shares. On April 3 Arcelor had transferred 89% of shares of Dofasco to Stichting and independent foundation under Dutch la, thereby removing Arcelor’s ability to sell or dispose of such shares without Stichting’s consent. On June 25, Mittal Steel and Arcelor agreed to terms of a recommended offer and later Mittal Steel acquired 94% of Arcelor stock.

On August 1, to resolve certain US competition concerns, Mittal Steel agreed to use its best efforts to sell Dofasco to ThyssenKrupp or, if Dofasco cannot be sold due to Stichting , to sell certain alternative assets.

Subsequently on September 25 and October 11 boards of Mittal Steel and Arcelor formally requested that the Stichting be dissolved and return Dofasco shares to Arcelor. On November 10, the Stichting board of directors unanimously decided not to dissolve and to retain the Dofasco shares, thereby continuing to prevent their sale.