The world's two largest steel producers, Mittal Steel and Arcelor, were reported close to an agreement Sunday to create a global steel giant after Mittal raised its offer to Arcelor by seven percent.
Arcelor directors meeting here were also weighing a partnership with Russian group Severstal and were expected later in the day to disclose which suitor they will recommend to their shareholders.
A souce close to the matter said Mittal, the world's leading steelmaker, was now offering 40.37 euros per Arcelor share, up from a previous offer of 37.74 euros, in its bid to tie up with the Luxembourg-based number two producer.
"Mittal Steel has asked the Arcelor board to consider an offer on the basis of 40.37 euros a share and there will be an accord," the source told AFP, asking not to be named.
Neither group would confirm the report.
Arcelor shares, in which trading has been suspended since last Wednesday, were last quoted at 35.02 euros.
The Arcelor board gathered here at 10:15 am (0815 GMT) and, roughly two hours later, Mittal directors convened in London.
Luxembourg's economy minister, Jeannot Krecke, told AFP that Arcelor directors would take a decision by Sunday evening.
"There will be a deal reached this evening," he said but declined to say which suitor Arcelor would choose.
Arcelor executives were bitterly dismissive of Mittal's initial offer, announced in January at 28.21 euros a share and later raised to 37.74, and vowed that it would never go through.
Arcelor chief excutive Guy Dolle described the offer as having been made with "Monopoly money" and later denigrated Mittal's products: "They make eau de Cologne, we make perfume."
Straggling to fend off persistent advances from Mittal Steel, founded by Indian billionnaire Lakshmi Mittal and now based in Rotterdam, Arcelor management late last month announced plans to merge with Severstal.
That deal was seen by analysts as a bid to thwart the Mittal offer. But it raised strong objections from a block of Arcelor shareholders who feared it would give Severstal chairman Alexei Mordashov too much power in a merged entity.
Severstal last week responded to shareholder hostility at Arcelor by altering its terms for a merger with the European group in a way that would reduce Mordashov's stake in a combined company.
Mittal Steel has also been reported to be ready to make other concessions, in particular regarding divestment of under-producing assets.
"With respect to management, (Mittal chairman) Lakshmi Mittal would also accept a minority holding in case of a merger with Arcelor," a source close to Arcelor told AFP earlier in the week.
Other sources have suggested that Mittal would settle for a holding below 45 percent after initially seeking a majority stake.
If Arcelor opts for Mittal Steel it will have to pay Severstal 130 million euros (162 million dollars) as an indemnity.
An Arcelor-Mittal marriage would create a global steel behemoth, with annual production of around 100 million metric tonnes, more than three times the output of its nearest rival, Japan's Nippon Steel, with 32.4 million tonnes.
Mittal Steel has said the combined company would control 10 percent of the global steel market, with total sales of more than 69 billion dollars and a world-wide workforce of 320,000.
Mittal Steel, which has risen from modest beginnings in India 30 years ago and has built its success on carefully-judged acqusitions, is mainly active in eastern Europe and North America while Arcelor concentrates on western Europe and Latin America.