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

It was the major player in Steel, Flat Steel products, Coated Steel, Tubes and Pipes

L.N. Mittal

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

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.

Guy Dolle

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

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

Headquarters at Luxembourg city

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

MALAY MUKHERJEE

Member of the Group

Management Board

ADITYA MITTAL

CFO Member of the

Group Management

Board

MICHEL WURTH

Member of the Group

Management Board

GONZALO URQUIJO

Member of the Group

Management Board

JOSEPH KINSCH

Member of the Group

Management Board

A STEEL PLANT

COLD ROLLING MILLS

HOT ROLLING MILLS

DOFASCO COILSELECTRIC ARC FURNACE

CONTROL ROOM

QUALITY CONTROL QUALITY CONTROL

STOCK CONTROL

ROLLS STOCK SEMI FINISHED PRODUCTS

SHEET PILLINGSTAINLESS STEEL

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!THANK YOU!