Mittal, Arcelor Now Won, Targets China, $8.7 Billion India Mill
July 14 (Bloomberg) -- Lakshmi Mittal, who won his five- month battle to take over Arcelor SA and create the world's largest steelmaker, now faces a bigger challenge. He plans to break into the fast-growing markets of China and India, where Arcelor and Mittal Steel Co. don't control any assets.
Mittal, the world's fifth-richest man, says he plans to tap into India and China as newly prosperous consumers buy cars, refrigerators and washing machines. India's steel demand may grow an average of 7.3 percent over the next decade, with China's market expanding 6.9 percent, Mittal forecasts.
Rotterdam-based Mittal Steel, which will own 61 plants in 27 countries after the merger is completed, must use its technological advantage to open new markets, said Stuart Fraser at Standard Life Investments. China and India have so far refused to let overseas steelmakers buy domestic manufacturers.
``The Chinese want Western steel technology,'' said Fraser, investment director for European equities at Edinburgh-based Standard Life, which owns about 0.7 percent of Arcelor. ``It's well worth Mittal and Arcelor getting involved.''
Mittal may say in a filing with the Madrid Stock Exchange as early as today that more than half of Arcelor's shareholders have accepted its $38.3 billion takeover offer, ending a contest that started with a hostile bid on Jan. 27. As of July 12, 17.6 percent of Arcelor shares had been tendered. Luxembourg-based Arcelor's board last month agreed to Mittal's improved terms and rejected a rival proposal from Russia's OAO Severstal.
Lakshmi Mittal, born into a steelmaking family in Rajasthan, India, has created a company that controls 10 percent of world steel output without ever operating a mill in his homeland.
Romania to U.S.
Mittal, 56, started his company in Indonesia in 1976. He has profited from the steel market's cycle of boom and bust, buying mills in developing countries from Romania to Algeria as prices crashed in 2001, and reaping profits in 2004, when he paid himself a cash dividend of $2 billion. The company bought Wilbur Ross's International Steel Group in April 2005 for $4.7 billion to become the No. 1 U.S. steelmaker.
The Mittal family's 88 percent stake in Mittal Steel, formerly known as Ispat International NV, is now worth about $21.2 billion. The entire company was valued at $3.5 billion when it went public in 1997.
Mittal highlighted his drive into India on July 7 when his Gulfstream jet touched down on the tarmac at the eastern city of Bhubaneswar. There, he announced plans to build an $8.7 billion steel mill in Orissa state.
``Now we are focusing on India and China,'' Mittal told reporters. ``India is a very important milestone for us to remain the biggest company in the global steel industry.''
Arcelor shareholders applaud that focus.
``When you move pieces in chess, you have to think about what you will do next,'' said Emmanuel Soupre, a fund manager at Neuflize Gestion in Paris, which oversees $15 billion, including Arcelor shares. ``You have to select high-growth markets.''
India, China Challenges
Still, investing in India and China isn't easy.
China, which produces a third of the world's steel, prohibits overseas investors from controlling domestic companies. India's government has delayed licenses for Mittal and Korea's Posco, the world's No. 3 steelmaker, to build steel mills in iron-ore rich provinces such as Orissa and Jharkhand.
India's government is reviewing a 49-year-old mining law that has prevented even local producers such as New Delhi-based Steel Authority of India from gaining new iron-ore mining licenses. Lakshmi Mittal last week complained of delays in securing permits to invest in Jharkhand.
``Progress is not satisfactory,'' he said.
Mittal was the first international steelmaker to acquire a stake in a Chinese company, buying 36.7 percent of Hunan Valin Iron & Steel Group last September for $338 million. Arcelor is awaiting government approval to acquire a 38 percent stake in Laiwu Steel Corp. for $260 million after agreeing to terms with the provincial government of Shandong.
Majority Stakes
``As far as I know, no foreigner has been permitted to go to anything like 50 percent within a Chinese steel company,'' Ross, now a Mittal director, said in a July 11 interview in New York. ``We await changes by the Chinese government to take a larger stake in their companies.''
China, with about 260 steelmakers, has increased production by an average of more than 20 percent a year since 2000, making it a net exporter, according to World Steel Dynamics, a researcher based in Englewood Cliffs, New Jersey.
Until now, China has only welcomed overseas investors that have technology not otherwise available to domestic companies. For example, Arcelor's venture with China's state-owned Baosteel Group supplied extra-long steel beams for Shanghai's World Trade Center that local steelmakers were unable to produce.
China Concerns
``Mittal got more into Europe because here business behavior is fair,'' said Ulf Moritzen, who helps manage about $7.6 billion at Nordinvest in Hamburg and sold his Arcelor shares in June. ``With China, you're never sure if they open the same plant around the corner and copy the same technology.''
Mittal told industry leaders at the European Business Summit in Brussels on March 16 that they have no choice but to accept the need to globalize.
``European steel companies are amongst the best in the world. The challenge is to harness these strengths to a globalizing economy,'' Mittal said. ``Failure to do so may have long-term damaging effects as new producers from the developing world seek to take advantage of their lower cost profile and gradually invest to close the quality gap.''
July 14 (Bloomberg) -- Lakshmi Mittal, who won his five- month battle to take over Arcelor SA and create the world's largest steelmaker, now faces a bigger challenge. He plans to break into the fast-growing markets of China and India, where Arcelor and Mittal Steel Co. don't control any assets.
Mittal, the world's fifth-richest man, says he plans to tap into India and China as newly prosperous consumers buy cars, refrigerators and washing machines. India's steel demand may grow an average of 7.3 percent over the next decade, with China's market expanding 6.9 percent, Mittal forecasts.
Rotterdam-based Mittal Steel, which will own 61 plants in 27 countries after the merger is completed, must use its technological advantage to open new markets, said Stuart Fraser at Standard Life Investments. China and India have so far refused to let overseas steelmakers buy domestic manufacturers.
``The Chinese want Western steel technology,'' said Fraser, investment director for European equities at Edinburgh-based Standard Life, which owns about 0.7 percent of Arcelor. ``It's well worth Mittal and Arcelor getting involved.''
Mittal may say in a filing with the Madrid Stock Exchange as early as today that more than half of Arcelor's shareholders have accepted its $38.3 billion takeover offer, ending a contest that started with a hostile bid on Jan. 27. As of July 12, 17.6 percent of Arcelor shares had been tendered. Luxembourg-based Arcelor's board last month agreed to Mittal's improved terms and rejected a rival proposal from Russia's OAO Severstal.
Lakshmi Mittal, born into a steelmaking family in Rajasthan, India, has created a company that controls 10 percent of world steel output without ever operating a mill in his homeland.
Romania to U.S.
Mittal, 56, started his company in Indonesia in 1976. He has profited from the steel market's cycle of boom and bust, buying mills in developing countries from Romania to Algeria as prices crashed in 2001, and reaping profits in 2004, when he paid himself a cash dividend of $2 billion. The company bought Wilbur Ross's International Steel Group in April 2005 for $4.7 billion to become the No. 1 U.S. steelmaker.
The Mittal family's 88 percent stake in Mittal Steel, formerly known as Ispat International NV, is now worth about $21.2 billion. The entire company was valued at $3.5 billion when it went public in 1997.
Mittal highlighted his drive into India on July 7 when his Gulfstream jet touched down on the tarmac at the eastern city of Bhubaneswar. There, he announced plans to build an $8.7 billion steel mill in Orissa state.
``Now we are focusing on India and China,'' Mittal told reporters. ``India is a very important milestone for us to remain the biggest company in the global steel industry.''
Arcelor shareholders applaud that focus.
``When you move pieces in chess, you have to think about what you will do next,'' said Emmanuel Soupre, a fund manager at Neuflize Gestion in Paris, which oversees $15 billion, including Arcelor shares. ``You have to select high-growth markets.''
India, China Challenges
Still, investing in India and China isn't easy.
China, which produces a third of the world's steel, prohibits overseas investors from controlling domestic companies. India's government has delayed licenses for Mittal and Korea's Posco, the world's No. 3 steelmaker, to build steel mills in iron-ore rich provinces such as Orissa and Jharkhand.
India's government is reviewing a 49-year-old mining law that has prevented even local producers such as New Delhi-based Steel Authority of India from gaining new iron-ore mining licenses. Lakshmi Mittal last week complained of delays in securing permits to invest in Jharkhand.
``Progress is not satisfactory,'' he said.
Mittal was the first international steelmaker to acquire a stake in a Chinese company, buying 36.7 percent of Hunan Valin Iron & Steel Group last September for $338 million. Arcelor is awaiting government approval to acquire a 38 percent stake in Laiwu Steel Corp. for $260 million after agreeing to terms with the provincial government of Shandong.
Majority Stakes
``As far as I know, no foreigner has been permitted to go to anything like 50 percent within a Chinese steel company,'' Ross, now a Mittal director, said in a July 11 interview in New York. ``We await changes by the Chinese government to take a larger stake in their companies.''
China, with about 260 steelmakers, has increased production by an average of more than 20 percent a year since 2000, making it a net exporter, according to World Steel Dynamics, a researcher based in Englewood Cliffs, New Jersey.
Until now, China has only welcomed overseas investors that have technology not otherwise available to domestic companies. For example, Arcelor's venture with China's state-owned Baosteel Group supplied extra-long steel beams for Shanghai's World Trade Center that local steelmakers were unable to produce.
China Concerns
``Mittal got more into Europe because here business behavior is fair,'' said Ulf Moritzen, who helps manage about $7.6 billion at Nordinvest in Hamburg and sold his Arcelor shares in June. ``With China, you're never sure if they open the same plant around the corner and copy the same technology.''
Mittal told industry leaders at the European Business Summit in Brussels on March 16 that they have no choice but to accept the need to globalize.
``European steel companies are amongst the best in the world. The challenge is to harness these strengths to a globalizing economy,'' Mittal said. ``Failure to do so may have long-term damaging effects as new producers from the developing world seek to take advantage of their lower cost profile and gradually invest to close the quality gap.''