Mittal Steel moved to strengthen its grip on the global steel industry with a $23 billion (€18.9 billion) hostile bid for main rival Arcelor in a deal that would also hand Canada's Dofasco to ThyssenKrupp.

Mittal, the world's biggest steelmaker, offered cash and shares worth €18.6 billion for European market leader Arcelor in what would be the fragmented sector's largest deal and forge a 100-million-metric tons producer more than three times as big as nearest rival Nippon Steel.

Dutch group Mittal said the combined group would have about 320,000 employees worldwide and annual sales of more than $69 billion. While Mittal has a strong presence in North America and eastern Europe, Arcelor dominates western Europe.

Mittal, about 88 per cent owned by Indian-born Lakshmi Mittal, the world's third-richest man, has led the drive to consolidate a steel industry where the top 10 players still have a combined market share of only about 30 per cent.

Mittal, which at one point owned Irish Steel, became the world's largest steel producer when it completed its buyout of US International Steel Group last year.

Arcelor's shares jumped as much as 41 per cent to a high of €31.29 before closing at a record €28.5, up more than 28 per cent, on speculation Mittal would have to raise the bid.

Mittal rallied 6 per cent to a 10-month high of €27.60 on the Amsterdam exchange amid a surge in European shares.

Billionaire founder Lakshmi Mittal would get 51 per cent in the combined group and a side deal would see Mittal sell Dofasco to ThyssenKrupp for about 5.4 billion Canadian dollars (€3.8 billion) if Arcelor completes its takeover of Dofasco.

Lakshmi Mittal told reporters the bid represented an attractive premium for Arcelor shareholders and would allow them to benefit from strong steel demand growth. There were no plans to improve the offer although he would not rule that out.

Arcelor noted the bid and said its board would discuss it.