ACQUISITION OF ARCELOR STEEL BY MITTALSTEELPresented by-Avaya Agasti, Roll No. 011Gyanendra Mishra, Roll No.026Himanshu Sekhar Nayak, Roll No. 027Jaydev Chand, Roll No. o29Manoj Kumar Pradhan, Roll No.037
ACQUISITION OF ARCELOR STEELMittal Steel Company N.V. was formed by the merger of• LNM holdings & ISPAT International• International Steel Group Inc.• CEO Lakshmi Mittal’s family owned 88% of the company and its headquarter was in Rotterdam, Netherlands• The company was the world’s largest steel producer by volume and also the largest in turnover and is now a part of ArcelorMittal• It was the major player in Steel, Flat Steel products, Coated Steel, Tubes and Pipes
ACQUISITION OF ARCELOR STEELArcelor was created through the merger of•Arbed (Luxembourg)•Aceralia (Spain)•Usinor (France)• Merger was launched on 19 February 2001Choice of Arcelor name was anounced on 12 December 2001• It was a major player in all its main markets:• automotive, construction, metal processing, etc• Guy Dolle was the CEO of Arcelor and its headquarter was in Luxembourg city.
ACQUISITION OF ARCELOR STEEL• THE BIG DEAL• In January 2006, Mittal Steel launched a $22.7 billion offer to Arcelor’s shareholders• The deal was split between Mittal Shares (75 percent) and cash (25 percent)• Under the offer, Arcelor shareholders would have received 4 Mittal Steel shares and 35 euros for every 5 Arcelorshares they held
ACQUISITION OF ARCELOR STEELTHE CONTROVERSY• Arcelor Management –• The management was extremely hostile to Mittal Steel’sbid• It believed to have been doing the acquisitions and notthe other way around• The CEO of Arcelor dismissed Mittal Steel as a “company of Indians”• European governments –• The French Government and the government ofLuxembourg was against the deal
ACQUISITION OF ARCELOR STEELMOVES BY ARCELOR TO COUNTER THE BID• Declaration of dividend – On February 16, Arcelor declared a dividend of 1.2euros to convince the shareholders of a positive situation under current management• The Russian Angle – To thwart the offer from Mittal Steel, Arcelor released a13 billion Euro merger plan with Severstal, a Russiancompany
ACQUISITION OF ARCELOR STEEL• ROLE OF GUY DOLLE• Analysts believe that Guy Dolle had issues with the personality and management of LN Mittal• Guy Dolle raised several issues about the safety record of Mittal• Guy Dolle is not a part of the new Arcelor-Mittal organization
ACQUISITION OF ARCELOR STEEL• THE STANCE OF INDIAN GOVERNMENTMost Indians believed that the deal was not gettingpushed because of Lakshmi Mittal’s nationalityThe Indian government raised the issue throughcommerce minister Kamal NathLN Mittal himself felt that there was no case of “racism” here as Mittal Steel was a European company and NOTan
ACQUISITION OF ARCELOR STEEL• END RESULT- THE FINAL DEALOn 25t h June, 2006 the deal finally clinched when the shareholders of Arcelor agreed to Mittal Steel’s offerMittal had to considerably sweeten the initial offer-by raising its valuation of Arcelor to $32.9 billionThe Mittal family holds 43 percent of the combinedgroupThe combined company holds 10 percent of the global market for steelTerm - VIIIM&APresentationPresentation.doc
ACQUISITION OF ARCELOR STEEL ARCELOR MITTALArcelor Mittal is now the largest steel company in theworldArcelorMittal is the leader in major globalmarkets, including automotive, construction, householdappliances & packagingThe company is headquartered in southern Luxembourg City, the former seat of ArcelorLakshmi Mittal (owner of Mittal Steel), a non-resident Indian is the Chairman and CEO
ACQUISITION OF ARCELOR STEELIt employs 310,000 employees in more than 60 countriesArcelorMittal key financials for 2007 show revenues of US$ 105.2 billionA crude steel production of 116 million tones, representing around 10% of world steel outputAs of May 17 2008, the market capitalization of ArcelorMittal was $144.37 billion
ACQUISITION OF ARCELOR STEEL• BRAND AND PHILOSOPHY• ArcelorMittals brand promise is transforming tomorrow, underpinned by a consistent set of values:•Sustainability•Quality•LeadershipCompany’s goal is to provide the leadership that willtransform tomorrows steel industry
ACQUISITION OF ARCELOR STEEL• THE PROS AND CONS OF THE DEAL• According to us the deal has been in favor of both the companies.• This can be suggested by the following PROS of the deal –• Increase in revenue of the company from $28.123 billion to $105.2 billion and operating income from $4.746 billion to $14.83 billion• Venture into new businesses and market like Luxembourg, Senegal, Liberia and looking to develop positions in the high-growth Chinese and Indian markets• Profit of the company has risen from $3.36 billion to $10.36 billion• Decreased competition and increased market share• Enlarged brand portfolio• Increase in economies of scale and share value.