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Mittal Steel
Mittal Steel is the world's largest and most global steel company, with shipments of
49.2 million tons and revenues of over $28.1 billion in 2005. They own steel-making
facilities in 16 countries, spanning four continents. They employ 224,000 people
spanning 49 different nationalities. Their shares are listed on the New York and
Amsterdam stock exchanges.
Mittal Steel has set the pace for the consolidation and globalization of the world
steel industry. They have taken on a range of acquisitions, many of them formerly
public sector-owned companies, and made successes of them. In the process they
have spread best practice and modern production techniques throughout their
plants. Their capital investment programme is unmatched in the industry.
Their 5000 strong customer base, spanning 150 countries, includes household
names in the automotive, engineering and appliance sectors. A force in every
segment of the steel market, Mittal Steel produces a broad range of high-quality
finished and semi-finished products for the flat and long products markets.
Mittal Steel is among the most efficient steel producers in the world. They
encompass all aspects of modern steelmaking, combining both integrated and mini-
mill facilities and producing much of the iron ore and coking coal used in their
furnaces. They are also among the most advanced steel makers, operating a range
of modern technologies. They have pioneered the use of direct reduced iron (DRI)
as a raw material source and are now the world‟s biggest producer of DRI. With two
technical research facilities, their product development teams are ready to meet
the needs of the most demanding customers.
Profile
Mr. Lakshmi N. Mittal is the Chairman and CEO of Mittal Steel Company. He founded
the company in 1976 and has been responsible for the strategic direction and
development of its businesses. Mittal Steel is the only truly global steel producer in
the world with operations on 14 countries, spanning 4 continents. Mr. Mittal‟s ability
to guide the company in its identification, acquisition and turnaround of steel assets
has led to its emergence as one of the world‟s fastest growing steel producers. Mr.
Mittal began his career working in the family‟s steelmaking business in India, and
has over 30 years of experience working in steel and related industries. Over the
years, Mr. Mittal has also championed the development of integrated mini-mills and
the use of Direct Reduced Iron or “DRI” as a scrap substitute for steelmaking and
led the consolidation process of the global steel industry. Other related activities of
Mittal Steel include shipping, power generation and distribution, and mining.
Following the transaction combining Ispat International and LNM Holdings to form
Mittal Steel in December 2004, together with the simultaneous announcement of
the acquisition of International Steel Group in the US to form the world‟s largest
steel producer, Mr. Mittal was awarded Fortune magazines “European Businessman
of the Year 2004”. Previously, he was awarded “Steelmaker of the Year” in 1996 by
New Steel in the USA, and the “Willy Korf Steel Vision Award” in June 1998, for
outstanding vision, entrepreneurship, leadership and success in global steel
development from American Metal Market and PaineWeber‟s World Steel Dynamics.
Mr. Mittal is an active philanthropist and a member of various trusts. Mittal Steel is
a significant contributor to local community and welfare activities for employees in
countries where the Group operates. Mr. Mittal is a member of the Foreign
Investment Council in Kazakhstan, the International Investment Council in South
Africa, the World Economic Forum‟s International Business Council and the
International Iron and Steel Institute‟s Executive Committee. He is a Director of
ICICI Bank Limited and is on the Advisory Board of the Kellogg School of
Management in the U.S.. He was born in Sadulpur in Rajasthan, India on June 15,
1950, and graduated from St. Xavier‟s College in Calcutta where he received a
Bachelor of Commerce degree. He is married to Usha Mittal, and has a son, Aditya
Mittal and a daughter, Vanisha Mittal.
Mittal Steel Growth Timeline
Arcelor was created by the merger of Aceralia, Arbed and Usinor, and the
determination of these three European groups to mobilise their technical, industrial,
and commercial synergies in a joint venture to create a global leader with the
ambition of becoming a major player in the steel industry. Officially launched on
February 19, 2001, the merger became effective on February 18, 2002, when the
Arcelor share was listed on several stock exchanges. The choice of the name Arcelor
was announced on December 12, 2001.
Arbed
Board of Directors
The Initial Bid and the Rejection
January 14: LN Mittal talked to Arcelor CEO Guy Dolle about the possibility of
Mittal Steel acquiring Arcelor. Guy Dolle categorically turns Mittal down.
January 27: Mittal Steel launches a formal takeover bid for $22 billion dollars.
January 29: Arcelor rejected the offer and the French government said it has
"great concerns" about the merger. Arcelor has plants in France.
The market sent Arcelor's Paris-listed shares soaring 29%, to EURO 28.6. Mittal
shares listed in Amsterdam closed up 6.2%, at EURO 27.63. Steel shares around the
world also rose.
Mittal said that Arcelor Chief Executive Guy Dolle wasn't positive about the
approach, but he was confident Arcelor's shareholders will back the bid.
A tie-up between the two companies would create a company with $70 billion a
year in revenue and the most global production capacity in the industry. Arcelor is
primarily a European producer while Mittal is scattered around the globe.
The next largest producers after Mittal and Arcelor are Nippon Steel Corp and Posco.
Mittal would become the leader in providing steel to the automotive industry in
Europe and the U.S., and would lead in the North American Free Trade Area in
appliances and packaging.
Hostility and Racism
There was a lot of hostility by Arcelor‟s Management Board as they felt that Mittal
Steel was resorting to underhanded techniques to merge with them. They dismissed
the idea of a merger with a "company of Indians".
The European Union said it was against racial discrimination and the issue would be
treated only on commercial considerations.
There was a lot of controversy where racist remarks were made against LN Mittal.
The bid stirred up passions amongst politicians, other leaders, and common man.
With the European Commission being accused of protectionism and racism,
Arcelor's CEO, Guy Dolle, offered a laundry list of ills in Mittal Steel because of
which the merger should not take place.
In London, a columnist for The Guardian spoke of how the bid unleashed a new
wave of 'economic patriotism,' adding that Mittal and his family were often
portrayed as aliens -- 'the Indians' -- rather than as global entrepreneurs.
Increasing Offers and Pressure
April 19: Mittal Chairman and Chief Executive Lakshmi Mittal calls Arcelor
Chairman Joseph Kinsch to ask for "friendly discussions'' about revising his proposal
in return for support from management.
April 28: Mittal tells Kinsch he is ready to make "significant corporate governance
changes'' and revise the offer.
May 4: Kinsch says the offer is "wholly inadequate'' and Arcelor has significant
concerns about the real value of Mittal shares.
May 9: Mittal Steel says it is ready to revise the offer and make corporate
governance changes "in the event of a recommended deal.''
May 10: Arcelor Chief Executive Guy Dolle describes as "insufficient'', Mittal's offer
to revise its bid.
May 11: Arcelor says it has filed a lawsuit in the United States against Mittal for
copying a type of steel for the auto industry.
May 19: Mittal raises its offer by 34 percent, bringing it up to $32.90 billion and
says it would reduce the Mittal family's stake in the company.
Severstal – A New Player
Severstal is a Russian company mainly operating in the steel industry, centered in
the northern city of Cherepovets. As such it is the second largest steel company in
Russia, behind Evraz Group. The company is owned by Alexei Mordashov.
May 26: Arcelor announces a deal with Severstal that will give it a controlling stake
in Russia's steelmaker and $16.4 billion for 32 percent of Arcelor.
June 2: European Union antitrust regulators approve Mittal bid on condition the
new combined steel giant sell off some of its facilities if the bid succeeds.
June 9: Arcelor confirms it has held talks with Mittal on the term of its bid.
June 12: Arcelor rejects Mittal revised bid and recommends shareholders accept
deal with Severstal. Arcelor says the revised offer still undervalues the company
and urges shareholders to support the Severstal merger instead, but mandates its
board to explore possible improvements to the Mittal offer at a later date. Mittal
says it won't budge on price, but is prepared to make changes related to corporate
governance.
June 20: In a bid to woo Arcelor, Severstal revised the terms of its merger proposal,
saying that majority owner Mr Alexei Mordashov would settle for 25 per cent of the
new group rather than the initially proposed 32.3 per cent and raised its offer by
about 2 billion.
Agreement to Merger and Final Merger
June 19: Arcelor cancels shareholder meeting on share buyback amid growing
shareholder opposition.
June 21: Market regulators in France, Spain, Luxembourg and Belgium suspend
Arcelor shares, saying they want more clarity on the state of talks with Mittal and
Severstal.
June 25: Arcelor's board agrees to sweetened bid from Mittal worth about $32.3
billion.
June 30: Paving the way for a merger between Arcelor and Mittal Steel, an
overwhelming majority of shareholders of the Luxembourg-based firm vote down a
merger proposal from Russia's Severstal.
57.95% per cent of Arcelor shareholders voted against the Severstal offer. In the
process, they accept Mittal Steel's $32.3 billion offer, which was approved by the
Board of Arcelor on June 25 after a five-month long battle.
Arcelor had recommended acceptance of share and cash from Mittal Steel valuing
at about $32.3 billion, which creates a group with 3,20,000 employees producing
about 116 million tonnes of steel annually, accounting for about 10% of the world
market.
Arcelor chairman Joseph Kinsch told shareholders that the long fight with Mittal was
worth it, saying the India-born steel tycoon L N Mittal and the markets had finally
recognised Arcelor's "true value." "We have created in five months more than EURO
12 billion in value," Kinsch said.
Snapshot View of the Merger
Transaction highlights
– Ownership of 50.5% for Arcelor investors and 49.5% for Mittal Steel investors
• New entity will capitalise on strong European heritage and presence, as well
as leading position in North America
• Company will be able to service global customers with broad and deep
product offering
• High level of direct access to raw materials making group more profitable and
less cyclical than most of its peers
The Combined Strategy
Mittal Co. to have leadership position in high end segments in Western Europe
with strong R&D capabilities.
Low Cost slab manufacturing in Brazil that can be expanded for export to Europe
and North America.
• Mittal Company will accomplish Arcelor‟s stated plan in the most efficient
way.
• Arcelor becomes a global player.
• Access to very low cost slab potential in Ukraine to serve West Europe.
The largest steel company in the world is created, a company larger than the
next 3 largest steel companies combined. According to the press releases
issued by the companies, “Consolidation creates value in the steel industry”.
Arcelor is primarily a European player, while Mittal has interests all around
the world. Together, they form
• 61 plants
• 27 countries
Why has LN Mittal not concentrated on India so far? One can speculate
that he was going at it step by step, conquering the world markets one by
one and now, only India is left. Till now, he has shown virtually no interest in
the Indian market.
Reports suggest that it was this bidding war with Arcelor that gave L N
Mittal's son Aditya, the CFO of Mittal Steel, the idea of taking over Arcelor. His
reason was that it would eliminate any future messy battles.
Why was the deal so important for LN Mittal? In a snapshot, the Mittal-
Arcelor combine would have an even larger share of the global steel market
and would be able to get a better grip over steel pricing.
Severstal had to be paid legal fees as they had been completely cut
out of the deal. Now Severstal has threatened a legal battle and a fresh bid. If
that happens, the immediate future, at least, will not be glinting enough to
Mittal‟ sadvantage.
• Re-rating potential
References
http://www.mittalsteel.com/Company/History/
http://www.mittalsteel.com/Company/Profile.htm
http://www.mittalsteel.com/Company/Management/
http://www.mittalsteel.com/News+and+Press/Press+Conferences+and+Pres
entations.htm http://www.arcelor.com/index.php?lang=en&page=77
http://sg.biz.yahoo.com/060127/15/3y9b5.html
http://www.nytimes.com/2006/06/26/business/worldbusiness/26arcelor.html?
ex=1308974400&en=8abefaa34217bd6f&ei=5088&partner=rssnyt&emc=rs
s http://economictimes.indiatimes.com/articleshow/1685717.cms
http://in.rediff.com/money/2006/feb/15msg1.htm