Shares in takeover target Arcelor were suspended yesterday pending a statement from the European steel group's board meeting in Luxembourg to discuss which suitor offers the best match for the company.
French regulators asked the company, fighting off a bid from Mittal Steel and wanting to merge with Russia's Severstal, to clarify the state of its merger talks.
Arcelor's directors met after Severstal offered improved merger terms aimed at blocking Mittal's hostile bid.
"The board has decided unanimously to meet again on Sunday in order to take a decision regarding the latest proposals of Mittal Steel and of Mr Mordashov (owner of Severstal)," said the Arcelor statement.
The French market watchdog has urged Arcelor to clarify its intentions with regard to the two proposals and provide more financial details about the possible merger with Severstal, a source familiar with the situation said.
Analysts and dealers said Mittal faced some pressure to raise its own 23 billion euro (£15.7 billion) bid.
"It seems to be a win-win situation for Arcelor because Severstal has improved the offer substantially and now this might force Mittal to sweeten its offer if it really needs Arcelor," said a trader at a French brokerage.
But Mittal could still have the upper hand even though it said it had made no new proposal. "At this stage they (shareholders) seem to be favouring the Mittal transaction rather than Severstal," said one analyst.
On Tuesday Severstal, advised by Lehman Brothers and ABN Amro, revised the terms of its merger proposal, saying its majority owner Alexei Mordashov would settle for 25 per cent of the new combined group rather than the initially proposed 32.3 per cent.
Under the previous deal, which envisaged Arcelor acquiring Severstal for shares on the basis of valuing Arcelor at 44 euros a share or 29.5 billion euros (£20.2 billion), Mr Mordashov would have ended up owning 32.3 per cent of the combined group after buying an additional tranche of new Arcelor shares, with that stake increasing to 38 per cent under a separate Arcelor share buy-back proposal, which was also priced at 44 euros a share.
Mittal yesterday said its own talks with Arcelor were continuing and constructive, and it attacked the latest Severstal proposal, saying it "fails completely to deal with key shareholder concerns".
"It remains a partial transaction, undervaluing Arcelor, which is to be pushed through without a proper shareholder vote," Mittal Steel said, asserting that its own offer remained superior.
Meanwhile leading Arcelor shareholder Jose Maria Aristrain was reported as saying the company should make a normal cash and share bid for Severstal and scrap the current proposal.
Mr Aristrain, whose family owns about 3.6 per cent of Arcelor, also called for the resignation of chairman Joseph Kinsch and chief executive Guy Dolle.