ACQUISITION OF ARCELOR STEEL

BY MITTAL STEEL

Presented by-
SONUKA AGARWAL (M.B.A. Design Management)
What are Mergers and Acquisitions?

Corporate Strategy, Corporate Finance &

Management

Buying, Selling & Combining of different

Companies

Aid, Finance or Help a growing Company in

a given Industry
 An Acquisition (takeover) is buying of one company (target)
by another

 An Acquisition may be friendly or hostile

 An Acquisition can be a ‘Reverse Takeover’

 Acquisitions can be done in two ways –

• the buyer buys the shares of the target company
• the buyer buys the assets of the target company

 There are pros and cons involved in every take over

 Mittal 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 L.N. Mittal

 It was the major player in Steel, Flat Steel

products, Coated Steel, Tubes and Pipes
 Arcelor was created through the merger of

•Arbed (Luxembourg)

•Aceralia (Spain)

•Usinor (France)

 Merger was launched on 19 February 2001

 Choice of Arcelor name was anounced on 12

December 2001
Guy Dolle
 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.
 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 Arcelor shares
they held
TOP PRODUCERS OF STEEL (VOLUME) AROUND
THE GLOBE in 2005
PERCENTAGE OF WORLD STEEL MADE BY TOP
STEELMAKERS
 THE CONTROVERSY
 Arcelor Management –
• The management was extremely hostile to Mittal Steel’s
bid
• It believed to have been doing the acquisitions and not the
other way around
• The CEO of Arcelor dismissed Mittal Steel as a “company
of Indians”

 European governments –
• The French Government and the government of Luxembourg
was against the deal
• The European Union approved of the deal
 MOVES BY ARCELOR TO COUNTER THE BID

 Declaration of dividend –

On February 16, Arcelor declared a dividend of 1.2 euros to

convince the shareholders of a positive situation under current
management

 The Russian Angle –

To thwart the offer from Mittal Steel, Arcelor released a 13

billion Euro merger plan with Severstal, a Russian company
 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
THE STANCE OF INDIAN GOVERNMENT

 Most Indians believed that the deal was not getting pushed
because of Lakshmi Mittal’s nationality

 The Indian government raised the issue through commerce

minister Kamal Nath

 LN Mittal himself felt that there was no case of “racism”

here as Mittal Steel was a European company and NOT an
Indian one
 END RESULT- THE FINAL DEAL

 On 25th June, 2006 the deal finally clinched

when the shareholders of Arcelor agreed to
Mittal Steel’s offer

 Mittal had to considerably sweeten

the initial offer-by raising its valuation of Arcelor to $32.9
billion

 The Mittal family holds 43 percent of the combined group

 The combined company holds 10 percent of the global

market for steel
 ARCELOR MITTAL

 Arcelor Mittal is now the largest steel

company in the world

 ArcelorMittal is the leader in major global

markets, including automotive, construction,
household appliances & packaging
Headquarters at
Luxembourg city
 The company is headquartered in southern
Luxembourg City, the former seat of Arcelor

 Lakshmi Mittal (owner of Mittal Steel), a non-resident Indian is

the Chairman and CEO
 It employs 310,000 employees in
more than 60 countries

 ArcelorMittal key financials for

2007 show revenues of US$ 105.2
billion

 A crude steel production of 116

million tones, representing around
10% of world steel output

 As of May 17 2008, the market

capitalization of ArcelorMittal was
$144.37 billion
ADITYA MITTAL JOSEPH KINSCH
CFO Member of the
Member of the Group Management
Group Management Board
Board

MICHEL WURTH GONZALO URQUIJO

Member of the Group Member of the Group
Management Board Management Board

MALAY MUKHERJEE
Member of the Group
Management Board
A STEEL PLANT
COLD ROLLING MILLS

HOT ROLLING MILLS

 ELECTRIC ARC FURNACE
DOFASCO COILS
 CONTROL ROOM STOCK CONTROL

QUALITY CONTROL QUALITY CONTROL

 ROLLS STOCK SEMI FINISHED PRODUCTS

STAINLESS STEEL
SHEET PILLING
 BRAND AND PHILOSOPHY

 ArcelorMittal's brand promise is

'transforming tomorrow', underpinned
by a consistent set of values:

•Sustainability

•Quality

•Leadership

 Company’s goal is to provide the leadership that will

transform tomorrow's steel industry
 THE PROS AND CONS OF THE DEAL
According to me 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.

The CONS of the deal include –

 High monetary cost of the target company (Arcelor) which is

$32.9 billion

As the pros of the deal completely outweigh the cons involved, it

can be said that the deal has been a successful one for both the
companies, its people and the world.
THANK YOU!