Mittal's takeover of Arceler

After five months of tussle, Lakshmi Mittal finally managed to
acquire world's second largest steel manufacturing company Arcelor.
The merger would lead to the Arcelor-Mittal co, which will be 3 times
as large as its nearest rival. It would account for 10% of the world
steel.
The deal
Mittal steel has offered 25.6 billion euro for the take over. It
raised it bid for the second time to almost double offering 40.40 per
share. Mittal had initially offered 23.6 billion euros for the
merger. Arcelor shareholders will receive 13 Mittal shares for 12
Arcelor shares. The new company is expected to have projected annual
sales of 38 billion euros.
The Challenge
One of the challenges which Mittal faced was to convince culture
conscious European about the deal. Initially the Belgian co. Arcelor,
was extremely hostile towards non-EU nation taking over the co.
Oppositions came mainly from the CEO Guy Dolle who planned to merge
with Russian steel co. Severstal to become world's largest steel
producer. The government of Belgium and France where Arcelor has most
of its steel plant located also opposed the Mittal offer.
One step more to go…
The only hurdle now remains is the shareholders meet of Arcelor on
3oth June, where they are to vote for the Severstal's proposal.
Arcelor will pay a break up fee of 140 million euros to the Russian
entity, if the shareholders halt the deal.
Benefits
After the merger, the newly formed entity will be able to meet the
demands of Chinese market that is currently in the process of
developing its infrastructure. China is currently in need of approx
730 tones of steel for its projects. In the past few years, the
demand has increased over 50%. The new co. will have a strong hold on
the world steel supply, and would still not gain monopoly in any
specific area. This is so because both Arcelor and Mittal steel have
targeted different parts of the world and would be able to fulfill
global needi.
Effect on world market
The shares of the new entity are expected to be listed in NYSE among
others. After the merger was announced the shares of Mittal steel
closed down by 2.4% while that of Arcelor jumped up by 7.2%.
Investments after the new entity is formed are expected to rise
higher.
Conclusion
With the acquisition of Arcelor, Mittal has been able to create a new
economic culture where countries with different mindset can work. The
deal is a victory of corporate democracy and makes Mittal of the
largest steel producer of the world.
Mittal steel has grown over the past years through various mergers
one the most important being merger of International steel based in
Chicago two years back.
The deal also reflects the excellent entrepreneur abilities possessed
by the Mittal who was able to convince Arcelor board, shareholders
and president Joseph Kinsch about efficacy of the merger taking
place



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