Mittal's takeover of Arcelor

vengabeats · Jun 28, 2006

India rejoices over Mittal's takeover of Arcelor

Steel baron Lakshmi Mittal's successful takeover bid of European steel firm Arcelor was on Monday hailed in India as a sign of the rise of Indian business leaders on the global stage.

Ministers feted Mittal, businessmen said he had made them proud to be an Indian, while newspapers and TV stations went into a frenzy reporting the culmination of a five-month-long battle that had triggered charges of xenophobia against Mittal's opponents.

The rejoicing came a day after Arcelor bowed to an improved 25.6 billion Euro ($32.2 billion) takeover bid from Mittal Steel to create a global giant three times larger than its nearest rival.

Finance Minister Palaniappan Chidambaram led the country's praise for the British resident.

"We are happy and proud that an Indian-born entrepreneur is the biggest steel maker in the world," Chidambaram was quoted as saying in a local newspaper.

Trade Minister Kamal Nath said that the deal demonstrated the "intellectual and entrepreneurial abilities" of Indians and the people of Indian origin.
"There's a new economic architecture and countries that have had a different mindset will now have accept that India is going to be a major player in the new global architecture," Nath said.

Mittal's bid for Luxembourg-based Arcelor had faced stiff opposition from several European governments, including Luxembourg and France, which had initially vowed to fight what they said was a hostile takeover attempt.
Indian business leaders had called the European reaction xenophobic.

Source: HindustanTimes

vengabeats · Jun 28, 2006

Mittal bid finally wins over Arcelor

PERSISTENCE: Mittal Steel's chairman was said to be `jubilant' over the deal, which will create a company that wields control of 10 percent of global steel production

BLOOMBERG
Tuesday, Jun 27, 2006,Page 10

Mittal Steel Co agreed to the steel industry's biggest takeover after Arcelor SA accepted an increased offer valued at 26.9 billion euros (US$33.7 billion), ending a bitter five-month feud.
Mittal raised its bid for a second time, by 10 percent to 40.40 euros a share, Arcelor deputy chief executive officer Michel Wurth told reporters on Sunday after a board meeting in Luxembourg.
Rotterdam-based Mittal, already the world's largest steel producer, had previously offered 23.5 billion euros.
Chairman Lakshmi Mittal "was jubilant" about the deal, director Wilbur Ross said in a telephone interview.
Ross, the US billionaire who sold his International Steel Group to Mittal for US$4.5 billion last year, received a mobile phone call from Mittal while on his way into central Paris yesterday.
"He just said: `We got it, we got it' about 20 times," Ross said.
Arcelor must now halt a deal with Russian steelmaker OAO Severstal that was intended to block Mittal and drew protests from investors by giving a controlling stake to billionaire Alexei Mordashov.
The union of Mittal and Arcelor will create a company that controls 10 percent of world steel production, three times more than its closest rival, and may prompt a new round of acquisitions across the industry.
"It's a generous" offer, said Gavin Wendt, a resources analyst at Fat Prophets Ltd in Sydney. "Some of Arcelor's major shareholders haven't been necessarily positive about the deals Arcelor had been doing, for instance, the tie-up with the Russian steelmaker. They should be fairly happy with the terms of this bid."
Mittal's bid is worth five times historical earnings before interest, taxes, depreciation and amortization, based on Arcelor's four most recent quarters. It paid 5.7 times EBITDA for Ross's ISG in April last year.
The 18-member board of Arcelor, the world's second-largest steel producer, voted unanimously to recommend Mittal's offer after more than eight hours of deliberations, according to chairman Joseph Kinsch.
The companies were to make a statement in Luxembourg yesterday and hold a press conference attended by Lakshmi Mittal.
"We still have to go through a few steps, but we are very confident now," Ross said.
Investors will have about two weeks extra to tender their shares into the Mittal bid as a result of Arcelor's decision, he added. The offer had been scheduled to close on July 5.
"Arcelor fought hard and long for this," said Philippe Gijsels, head of European equity strategy at Fortis Bank SA in Brussels. "It's the best match."
The new company, to be called Arcelor-Mittal and based in Luxembourg, will have more bargaining power with suppliers and customers such as Toyota Motor Corp and Ford Motor Co. Mittal will own about 40 percent of the combined company, while current shareholders will retain the rest, Wurth said.
Wurth declined to say what role Arcelor chief executive officer Guy Dolle would have in the new firm.
Dolle had sought to repel Mittal by agreeing to buy most of Cherepovets, Russia-based Severstal from Mordashov, which would have created a steelmaker even bigger than Mittal.
"Shareholders in Arcelor have become very vocal" against the Severstal deal during the past 10 days, said Stephen Pope, head of equity research at Cantor Fitzgerald LP in London.
Severstal, in a PRNewswire statement, said its agreement with Arcelor was legal and binding, and that it was "reviewing all its options."
Mordashov still stands to collect a 140 million euro break fee if Mittal acquires Arcelor.
Billionaire Roman Abramovich may help Mordashov raise his offer, Russia's Vedomosti newspaper reported yesterday, citing an unidentified person familiar with the plans.

Source : Taipei Times, Taiwan

bonddonraj · Jun 29, 2006

The Mittal-Arcelor deal which ended in a merger had started originally as a hostile takeover bid. Usually mergers occur in a friendly setting where executives from the two companies participate in a due-diligence process to ensure a successful combination of all parts, but the Arcelor-Mittal merger happened only after a long struggle by Laxmi Mittal to take over the second biggest steel company.

There were many mergers between 2005 and 2006. These included: Kmart with Sears, Roebuck costing $11billion; Proctor and Gamble buying out Gillette at $54 billion; Macromedia Inc with Adobe Systems Inc., at $3.4 billion. The mergers that happened in the last five months include: Walt Disney company buying out Pixar for $7 billion. Most of these were examples of due diligence, but in case of Arcelor-Mittal, the last five months were a continuous battle.

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.

Also potentially standing in the way of the merger was the European Commission, which has blocked many a deal, the most famous one being General Electric's $43 billion acquisition of Honeywell--even though it had been approved in the United States.

It may be recalled that Dolle said that Mittal Steel lacked strong corporate governance practices. He even went on to compare Arcelor with parfum and Mittal Steel with eau de cologne (which of course was clarified later)

Dolle said that the two companies had a different work culture and were not compatible.

He said that while Mittal Steel was into producing volumes, they did a lot of value addition, so the synergy was not possible.

According to nay-sayers this was not the best of starts for a merger where the two companies come together to achieve economies of scale, synergy and increased market-share, even though they are pointing exactly what would happen if the Arcelor-Mittal deal were to fall apart; few mergers of this magnitude have ever failed so late in the process.

pratik_mehta7 · Jun 29, 2006

dont get so happy on what i call as a happily failed syndrome. agreed that Arcelor enjoys a competitive advantge in high steel, but what does the Turnaround king thinks of it? there are some things that are better not changed. instead of acquiring the firm they could have setup a whole new unit and india would have been a major beneficiary, but with this happening they have just bought a white elephant, which needs to be taken care but with oppurtunity costs too high.

Mittal's takeover of Arcelor

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