ACQUISITION OF

ABHIMANYU SHARMAASIMITA KHAJURIA

HITESH SHARMASONAL ABROL

BY

INTRODUCTION….. THE TWO COMPANYMITTAL STEEL: Mittal steel is the largest producer of

steel in terms of volume and also largest in turnover.

Despite Mittal steel industry is based in Netherlands, it is perceived that the the company is non- european because its CEO, Lakshmi Mittal, is Indian.

ARCELOR: Was the largest producer of steel in terms

of turnover. Second largest in terms of steel output. Created by the merger of three

companies: Aceralia(Spain), Arbed(Luxembourg), Usinor(France)

INTRODUCTION….. ACQUISITION

The acquisition of Arcelor by Mittal steel led to the creation of Arcelor- Mittal , the largest steelmaker in the world. It has been one of the most controversial business deals ever. When the European steel maker bowed by the Mittal steel.

In January 2006 Mittal steel offers to the shareholders of Arcelor to create the worlds first 100million tone plus steel producer.

And launched a 22.7 billion dollars offer to Arcelor shareholders.

In June 2006 Mittal and Arcelor reach an agreement to combine the two companies in a merger of equals.

THE BID

CONTROVERSYThe Arcelor believe that it should acquire other

companies rather than the other way around. The management was extremely hostile to Mittal steel’s bid from the beginning. Arcelor repeatedly played the patriotic card to convience shareholders to reject the bid. The CEO of Arcelor dismissed Mittal steel as a company of Indian and unworthy of taking of a European company.

The France government was against a deal because of worries over the future of 28000 Arcelor employees.

The government of Luxembourg was against a deal as well for a variety a reasons.

However all these attempts went wrong when the European Union approved the Mittal-Arcelor deal.

INDIAN GOVERNMENT’S STANCE

Most Indian’s were of the opinion that the deal was not getting pushed through because of Mittal’s nationality.

The Indian government raised the issue at several forums, especially through Commerce Minister Kamal Nath.

There were allegations that India had threatened not to ratify a taxation accord with Luxembourg due to the latter’s opposition to the deal.

END RESULT

The deal was finally clinched when the share holders of Arcelor agreed to Mittal steel’s offer.

Mittal steel had to raised its valuation of Arcelor to 32.9 combined company holds 10% of the global market for steel.

POSITION Mittal- Arcelor the new

entity will be based on Arcelor’s industrial model.

It has been decided that the management board will have seven members, four from Acelor and three nominal from Mittal steel.

L. Mittal is the CEO and Joseph kinsch from Arcelor is the president of the company.

CORE STRENGTHS

We have quality core assets We have a world-class mining business We are delivering cost improvement We are leaders in automotive steel We have a stronger balance sheet

Awards Mittal was awarded Fortune magazines

“European Businessman of the Year 2004”

Previously, he was awarded “Steelmaker of the Year” in 1996 by New Steel in the USA

The “Willy Korf Steel Vision Award” in June 1998

In March 2005, Forbes named him the third richest man in the world and the richest non-American, with a wealth of $25 billion.

CURRENT STATUS World’s largest and most global steel

company with shipment of 83.8 million tones

and revenue of over $84 billion in 2012

No. 1 high quality steel producer with crude

steel capacity with more than 119 million

tons per annum

Own steel making facilities in 20 countries

spanning 4 continents

Employs 2420000 people spanning 49

different nationalities

ArcelorMittal sells its steel products primarily in over 170 countries including the automotive, appliance, engineering, construction and machinery industries.

Sales

YEAR ANNUAL SALES(BILLION US$)

2007 $105.21

2008 $124.93

2011 $94.0

2012 $84.2

2013(HALF YEARLY TILL JUNE 30,2013)

$39.9

SUMMARY

Initially mittal launched an offer of 22.7 billion dollars to acquire arcelor

Arcelor tried many tactics to reject the offer

Moreover they declared the increase in the dividend by 85%

But finally the merger happened at the valuation of 32.2 billion dollars

conclusion•The business strategy that has made the mittal-arcelor steel the world’s largest steel maker is a commitment to consolidate & globalisation & a willingness to take risks that scare off competitors.•As the steel industry overall struggled in the present decade ,mittal steel grappling with financial problems of its own,continued to expand.•And as competitors insisted that steel should remain a regional business.•Mittal steel persued its vision of becoming a global giant

QUESTIONS….

1. Why did the French government oppose the acquisition of Arcelor by Mittal steel?

• Worried about the employees of the arcelor

QUESTIONS….

2. How did Arcelor try to block the acquisition by Mittal steel?

•INCREASED THE DIVIDEND BY 85%•DECLARED THE DEAL WITH THE RUSSIAN COMPANY “SEVERSTAL”

QUESTIONS….

3. What influence tactics did Mittal employ to clinched the deal?

• INCREASED THE VALUATION OF ARCELOR TO 25.8 BILLION EUROS(32.9 US BILLION DOLLARS)

QUESTIONS…..

4. Discuss Mittal’s tenacity in the power struggle for the acquisition?

•Mittal was very firm in acquiring the arcelor•Mittal wanted to be the giant player•He tried to convince the french government that the employees of arcelor will not be laid off•Increased the valuation of arcelor to 32.9 billion dollars

THANK YOU