Uploaded byDibyajyoti Saikia
Arcelor Mittal : Merger by Absorption
The document discusses the merger of Arcelor and Mittal Steel, highlighting the background of both companies and the financial details of the merger. The initial offer in January 2006, valued at $27.05 billion, faced controversy but was eventually raised to $35.3 billion, leading to a two-step merger finalized in June 2006. The merger resulted in the creation of ArcelorMittal, the world's largest steel producer, facilitating a more efficient integration of their operations under Luxembourg jurisdiction.
Arcelor Mittal : Merger by Absorption
- 1. MERGER OF ARCELORMITTAL Team Members: Charvi Singh Dibyajyoti Saikia Shefali Naval Shoubhik Pakrasi
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- 3. Mittal Steel CompanyN.V. - CEO Lakshmi Mittal Formed by the merger (2004) of • LNM holdings & ISPAT International • International Steel Group Inc Headquartered in Rotterdam, Netherlands. 2005 Revenues was $28.10 billion World’s largest steel producer by volume and also the largest in turnover Major player in following products : Steel, Flat Steel products, Coated Steel, Tubes and Pipes Mittal Steel Guy Dolle was the CEO of Arcelor and its Arcelor was the world's largest steel producer in terms of turnover before takeover Second largest in terms of steel output Headquartered in Luxembourg city In 2005, Arcelor had revenues of $38.84 billion Arcelor was created through the merger of three companies: Arbed, Aceralia and Usinor
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- 7. MERGER DEAL The InitialDeal • 27 January 2006 : Mittal Steel offers the shareholders of Arcelor to create the world's first 100 million tons plus steel producer The deal valued at $27.05 billion offer to Arcelor’s shareholders The deal was split between Mittal Shares (75 percent) and cash (25 percent) But soon the deal landed into controversy The Final Deal Deal finally clinched when the shareholders of Arcelor agreed to Mittal Steel’s offer – In June 2006 Mittal raised its valuation of Arcelor to $35.3 billion. The Mittal family holds 43 % of the combined group. The combined company holds 10 percent of the global market for steel.
- 8. MERGER DEAL SWAP Ratio= 0.875 ArcellorMittal Share Price = 35.32 Euro Arcellor Share Price = 40.37 Euro • Luxembourg Law states that Fraction share is transferrable and cannot be listed. • So final agreement was for a 1:1 SWAP deal.
- 11. WHY ARCELOR? An AttractiveTarget: • Arcelor had 71% pre merger revenue share from Europe while Mittal had only 34% • While in North America the revenue share for Arcelor was only 9% but Mittal had 42% Resulted in having complementary industrial and market footprint
- 12. THE TWO STEPMERGER PROCESS The two-step merger process was structured to enable Mittal Steel to comply more rapidly and efficiently with part of the MOU undertakings. In addition, the first-step merger permitted a simplification of the group’s corporate structure, as both ArcelorMittal and Arcelor are located in the same jurisdiction (Luxembourg) with the same headquarters. The first-step merger therefore contributed to a more efficient and rapid integration of the management and administrative teams of Mittal Steel and Arcelor. The second-step merger of ArcelorMittal into Arcelor will constitute the second and final step of the combination of Mittal Steel and Arcelor into a single legal entity governed by Luxembourg law. In this second-step merger, ArcelorMittal (the surviving entity in the Mittal Steel and ArcelorMittal merger) will merge into Arcelor and shareholders of ArcelorMittal will become shareholders of Arcelor, which will be renamed “ArcelorMittal”.
- 13. TWO STEP MERGERFLOWCHART Mittal Steel • Verger Investments S.A (Wholly-owned Subsidiary of Mittal Steel) • Later renamed as Arcelor Mittal ArcelorMittal Arcelor Later renamed as ArcelorMittal Both ArcelorMittal and Arcelor are under Luxembourg Jurisdiction Merger by absorption of Mittal Steel by ArcelorMittal w/o liquidation ArcelorMittal merged into Arcelor for a 1:1 Exchange Ratio of Shares Step 1 Step 2
- 14. NEGOTIATIONS : TIMELINE 27January 2006 Mittal announces EUR 18.6 bn (about US$ 27.05 bn) cash and shares offer 29 January 2006 Arcelor rejects Mittal’s proposal as “hostile” 4 April 2006 Arcelor announces return of more than EUR 5 bn (about US$ 6.6 bn) to shareholders and puts Dofasco into Dutch foundation 18 May 2006 Mittal offer officially opens following regulatory clearance in France, Belgium, Netherlands and Luxemburg 19 May 2006 Mittal raises offer to EUR 25.8 bn (about US$ 32.9 bn)
- 15. NEGOTIATIONS : TIMELINECONTD. 31 May 2006 20 to 30% of Arcelor shareholders sign a letter demanding the right to choose between the Severstal and Mittal proposals 25 June 2006 Arcelor board recommends increased Mittal offer of euro 26.9 bn (about US$ 35.3 bn) 26 July 2006 92% acceptances announced 17 august 2006 Closing od subsequent offer period ( 93.7% acceptances announced ) 17 November 2006 Closing of the mandatory sell-out period ( <95% acceptances announced )
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- 17. REFERENCE SEC Document : https://www.sec.gov/Archives/edgar/data/1243429/000115697307001457/y0 1811b3e424b3.htm#104 Ironand Steel Industry: https://www.ukessays.com/essays/business/analysis-mittals-acquisition-arcelor- 3891.php
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