Armittal

ACQUISITION OF ARCELOR STEEL BY MITTAL STEEL

Presented 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 STEEL

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

• 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 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.



• 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


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 25t h 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 steelTerm - VIII\M&A\Presentation\Presentation.doc


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

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


• 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 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.

Thank You

Business

Armittal