Acquisition of Arcelor by Mittal Steel

1. ACQUISITION OF
B
Y
GAUTAM CHAKRABORTY
NDIM, Delhi

2. 1. INTRODUCTION OF
A. POWER & POLITICS
B. TWO COMPANY
C. ACQUISTION
2. THE BID
3. CONTROVERSY
4. INDIAN GOVERNMENT’S STANCE
5. END RESULT
6. CURRENT POSITION
7. SUMMARY
8. CONCLUSION
9. QUESTIONS

3. POWER:-
Power is the capacity of a
person, team, or organization to influence others.
 The potential to influence others
 People have power they don’t use and may not know they possess
 Power requires one person’s perception of dependence on another
person
POLITICS:-
Attempts to influence others using
discretionary behaviours to promote personal
objectives
 Discretionary behaviours — neither explicitly prescribed nor
prohibited

4. INTRODUCTION…..
B. THE TWO COMPANY
MITTAL 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), U

5. INTRODUCTION…..
C. 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.

6.  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.

7. CONTROVERSY
 The 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

8.  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.

9.  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.

10.  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.
 The Mittal family has the 43%
stake on the new entity Arcelor-
Mittal.

11.  World’s largest and most global steel
company with shipment of 49.2 million
tones and revenue of over $100 billion in
2010 and net income of $5.4 billion
 No. 1 high quality steel producer with
crude steel capacity with more than 70
million tons per annum
 Own steel making facilities in 16
countries spanning 4 continents
 Employs 2240000 people spanning 49
different nationalities

12.  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

13. 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

14. 1. Why did the French government oppose the acquisition of
Arcelor by Mittal steel?
• Worried about the employees of the
arcelor

15. 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”

16. 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)

17. 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