World Steel Industry : Steel, the recycled material is one of the top products in the manufacturing sector of the

world.
The Asian countries have their respective dominance in the production of the steel all over the world. India being one among the fastest growing economies of the world has been considered as one of the potential global steel hub internationally. Over the years, particularly after the adoption of the liberalization policies all over the world, the World steel industry is growing very fast. Steel Industry is a booming industry in the whole world. The increasing demand for it was mainly generated by the development projects that has been going on along the world, especially the infrastructural works and real estate projects that has been on the boom around the developing countries. Steel Industry was till recently dominated by the United Sates of America but this scenario is changing with a rapid pace with the Indian steel companies on an acquisition spree. In the last one year, the world has seen two big M&A deals to take place

The Mittal Steel, listed in Holland, has acquired the world's largest steel company called Arcelor Steel to become the world's largest producer of Steel named Arcelor-Mittal. Tata Steel of India or TISCO (as listed in BSE) has acquired the world's fifth largest steel company, Corus, with the highest ever stock price. It has been observed that Steel Industryhas grown tremendously in the last one and a half decade with a strong financial condition. The increasing needs of steel by the developing countries for its infrastructural projects has pushed the companies in this industry near their operative capacity. The most significant growth that can be seen in the Steel Industry has been observed during the period 1960 to 1974 when the consumption of steel around the whole world doubled. Between these years, the rate at which the Steel Industry grew has been recorded to be 5.5 %. This roaring market saw a phase of deceleration from the year 1975 which continued till 1982. After this period, the continuous fall slowed down and again started its upward movement from the early 1990s. Steel Industry is becoming more and more competitive with every passing day. During the period 1960s to late 1980s, the steel market used to be dominated by OECD (Organization for Economic Cooperation and Development) countries. But with the fast emergence of developing countries like China, India and South Korea in this sector has led to slipping market share of OECD countries. The balance of trade line is also tilting towards these countries. The main demand creators for Steel Industry are Automobile industry, Construction Industry, Infrastructure Industry, Oil and Gas Industry, and Container Industry. New innovations are also taking place in Steel Industry for cost minimization and at the same time production maximization. Some of the cutting edge technologies that are being implemented in this industry are thin-slab casting, making of steel through the use of electric furnace, vacuum degassing, etc. The Steel Industry has enough potential to grow at a much accelerated pace in the coming future due to the continuity of the developmental projects around the world. This industry is at present working near its productive capacity which needs to be increased with increasing demand. The following table gives a clear picture upon the major crude steel producers in the world as of the year 2004.

Country China Japan United State Russia South Korea F.R.Germany Ukraine Brazil India Italy

Crude Steel Production (mtpa) 272.5 112.7 98.9 65.6 47.5 46.4 38.7 32.9 32.6 28.4

In the year 2004, the global steel production has made a record level by crossing the 1000 million tones. Among the top producers in the steel production, China ranked 1 in the world. Production of steel in the 25 European Union countries was at 16.3 mmt in January 2005. Production in Italy increased by 11.5 per cent in comparison to the same month in 2004. Italy produced 2.5 mmt of crude steel in January 2005. Austria produced 646,000 metric tones. In Russia it increased by 4.0 per cent to reach at 5.5 mmt in January. In case of the North America region particularly in it was 1.5 mmt of crude steel in January 2005, up by 8.0 per cent compared to the same month in 2004. Production in the United States was 8.3 mmt. Brazil had produced 2.6 mmt of crude steel in January 2005. In South America region it was 3.7 mmt for January 2005. According to rating made by the " World Steel Dynamics", Indian HR Products are categorized in the Tier II category quality of products. Both EU and Japan have ranked the top. USA and South Korea comes as like India.

World Steel Industries

World Steel Industries are undergoing a booming phase with all sorts of Mergers and Acquisitions taking place all around the world. The key market players are now subjected to fierce competition from the new companies from developing economies. From the early 1990s, China and South Korea have emerged significantly in the

World Steel Industries. In the very recent years India is also on a winning streak in terms of M&A. First of all, it was NRI Laxmi Mittal's Mittal Steel (listed in Netherlands) to acquire Arcelor, many times greater than it. Then came the Indian big shot TATA Steel to acquire Corus, the fifth largest steel company in terms of production capacity. Thus, it is being observed that World Steel Industries is going at a very competitive pace and time where the OECD (Organization for Economic Cooperation and Development) countries don't have their monopoly on the steel market. The main demand for World Steel Industries comes from the construction industry. With the developmental works on a rise in both the developed and developing countries, the infrastructure industry along with real estate boom, the demand for steel is rising like anything. For example, more and more real estate companies are using steel frames for building houses. In USA, it had been observed in the early 1990s that the use of steel for house building has increased by nearly five times in just one year. The automobile industry is also coming up fast as a potential demander for World Steel Industries because from a research it has been found out that the use of steel in the vehicles would cause the weight of the same to lessen by almost twenty five percent. The other industries who demand steel industries involve appliance industries, Oil and Gas industries and container industries. On the technological front, the World Steel Industries are making rapid improvement with the implementation of cutting-edge technologies like steel making through the utilization of electric furnace, continuous annealing, casting of thin slabs, and vacuum degassing.

MITTAL-ARCELOR MERGER Running Head : MITTAL-ARCELOR MERGER MITTAL-ARCELOR MERGER In APA style Mittal-Arcelor Merger Merger Background Integration of the unconsolidated sector The merger between Arcelor and Mittal Steel was a five months long drama which ended with Laksmi Mittal owning the European steel manufacturer .It started sometime in January 2006 and ended in August as the merger becomes official . The merger resulted 100 million metric tons company which is larger than 3 times India s steel production and also larger than the production of steel by Russia and the United States . The combined company too control of approximately 10 of the global share of steel production capacity . The Mittal family now owns 43 .4 of stake in the combined entity and Arcelor own 50 .5 stake . Both Laksmi Mittal and Joseph Kinsch agreed to jointly lead the newly created company .The Mittal Steel has already established presence in 27 countries using 61 manufacturing locations . People might wonder about the backgrounds of such an aggressive takeover . Laksmi Mittal believes that the collaboration will generate the following advantages :Enhanced R D capabilities , and leadership position in high-end segments of North America Access to more operations in economies with high growth rates like Asia and South America Operation in high growth markets with low-cost and profitable assets Gaining local operations expertise in various emerging markets Access to abundant amount of raw materials Upstream integration Enhanced portfolio into the entire spectrum of steel products Mittal Steel is a company developed single handedly by Laksmi Mittal from a small mill in Indonesia into a 20 billion worth of multinational giant with 175 ,000 employees operating his business in Eastern and Central Europe , USA , Asia , Africa and the Caribbean . In the process however , Mittal Steel also gather-up quite a significant amount of debt . The merger with Arcelor is one of Mittal s ideas of revitalization . Arcelor on the other hand , was already the result of a 10 billion merger between three European steel giants . By assets ,Arcelor is the second largest `steel factory in the world , but the company has quite a healthier financial portfolio , one of the reason is the fact that it is partially owned by the European government . It is perhaps the most suitable target for Mittal s `rejuvenation plan .Critical Issues in the Process As mentioned previously , the merger is considered to be an interesting drama that involved several powerful parties . This chapter will elaborate most of the critical issues of the merger .Defeating economic protectionism It is not exaggerating to say that the merger between Arcelor and Mittal was one of the most difficult merger to play . One of the reasons is the `hidden economic protectionism agenda from the European countries . Due to the fact that a part of Arcelor is government owned , many European countries believed that the takeover would mean a takeover of one of the continent s best assets . A number of European countries were against the merger and they have even performed several efforts to prevent the merger

Arcelor S.A. was the world's largest steel producer in terms of turnover and the second largest in terms of steel output, with a turnover of 30.2 billion and shipments of 45 million metric tons of steel in 2004. The company was created by a merger of the former companies Aceralia (Spain), Usinor (France) andArbed (Luxembourg) in 2002

Business
Employing 310,000 employees in over 60 countries, it is a major player in all its main markets: automotive, construction, metal processing, primary transformation, household appliances, and packaging, as well as general industry. With total sales of over 30 billion, Arcelor is the world's largest steel manufacturer in terms of turnover. It produces long steel products, flat steel products and inox-steel. In January 2006 Arcelor announced the acquisition ofDofasco, Canada's largest steel producer with an annual output of 4.4 million tons. After an intense bidding war against the German ThyssenKrupp, Arcelor had finally bid 5.6 billion Canadian dollars. The high bid proves the importance of Arcelor's improving presence in the North American market.

Merger with Mittal Steel

The company was the target of a takeover bid by its rival Mittal Steel on 2006-01-27.[1] However, the bid resulted in substantial increase in Arcelor's share value. Two members of the board of Arcelor, Guillermo Ulacia and Jacques Chabanier also resigned suddenly.[2] On May 26, 2006 Arcelor announced its intention to merge with Severstal. Since then several economists, media and shareholders have questioned the intentions of Arcelor in announcing its merger with Severstal due to a perceived opacity in the transaction. But on 25 June 2006, the Arcelor board decided to go ahead with the merger with Mittal Steeland scrapped plans for Severstal merger. The new company is now called "Arcelor Mittal". Arcelor also paid Severstal 140 million as a "fine" for the fall-out of their failed talks. Lakshmi Mittal (owner of Mittal Steel) became the president and Joseph Kinsch (formerly Arcelor chairman) was appointed chairman of the new company till his retirement. [3][4] Arcelor's merger with Mittal created the worldwide leader in the steel industry, increasing its bargaining power with suppliers and consumers. Mittal steel has agreed to pay 40.37 euros a share to Arcelor, almost double the amount offered by Mittal last time.

Mittal Steel Company N.V. was one of the world's largest steel producers by volume, and also one of the largests in turnover. The company is now part ofArcelorMittal.[1] CEO Lakshmi Mittal's family owned 88% of the company. Mittal Steel was based in Rotterdam but, managed from London by Mittal and his son Aditya. It was formed when Ispat International N.V. acquired LNM Holdings N.V. (both were already controlled by Lakshmi Mittal) and merged with International Steel Group Inc. (the remnants of Bethlehem Steel, Republic Steel and LTV Steel) in 2004. On 25 June 2006, Mittal Steel decided to merge with Arcelor, with the new company to be called Arcelor Mittal. The merger has been successfully approved by shareholders and directors of Arcelor making L.N. Mittal the largest steel maker in the world.

[edit]History In 1989, the company acquired Iron & Steel Company of Trinidad & Tobago. In 1992, the company acquired Sibalsa. In 1994, the company acquired Sidbec-Dosco. In 1995, the company Acquisitions of Hamburger Stahlwerke, which formed Ispat International Ltd. and Ispat Shipping, and Karmet. In 1997, the company Acquisitions of Walzdraht Hochfeld GmbH and Stahlwerk Ruhrort. In 1997, the company Ispat International NV goes public. In 1998, the company acquired Inland Steel Company. In 1999, the company acquired Unimtal. In 2001, the company Acquisitions of ALFASID and Sidex. In 2002, the company Business assistance agreement signed with Iscor. In 2003, the company acquired Nowa Huta. In 2004, the company Acquisitions of Polskie Huty Stali, BH Steel, Macedonian facilities from Balkan Steel. Creation of Mittal Steel. In 2005, the company Hire Deloitte as the primary auditors for the company. In 2005, the company acquired International Steel Group. In 2005, the company acquiredKryvorizhstal. In 2005, the company Investment of $9 billion in Jharkhand, India announced. In 2006, the company Merger with Arcelor announced and completed after much controversy. In 2006, the company Investment for 12 million tonnes capacity steel plant announced in Orissa, India. In 2009, the company Acquire 34% stake in Uttam Galva. [edit]Bids

and acquisitions

In October 2005 Mittal Steel acquired Ukrainian steel manufacturer Kryvorizhstal for $4.8 billion in an auction after a controversial earlier sale for a much lower price to a consortium including the son-in-law of ex-President Leonid Kuchma was cancelled by the incoming government of President Viktor Yushchenko. In 2005 Lakshmi Mittal flew into Jharkhand, India to announce a $9 billion investment to build a greenfield steel plant with a 12 million tonnes per annum production capacity.

On 27 January 2006 it announced a $23.3 billion (18.6 billion, 12.7 billion) bid for Arcelor. On 19 May 2006 Mittal increased its offer for Arcelor by 38.7% to $32.4bn, or $47.34 per share (25.8bn, 37.74 per share). On 25 June 2006 Arcelor, in a board meeting announced that it has accepted a further sweetened offer ($50.68 or 40.4 per share) and the new company would now be called ArcelorMittal, thus successfully ending one of the most controversial and publicised takeover bids in modern corporate history. ArcelorMittal is now by far the largest steelmaker in the world by turnover as well as volume, controlling 10% of the total world steel output.
[1]

Mittal bid
Germany has laid new draft laws before parliament about the way in which future takeovers are conducted only a day after Luxembourg did the same, in the wake of the hostile 19.6 billion (13.4 billion) bid by Mittal Steel for smaller rival Arcelor. As Arcelor unveiled a strong set of annual results for 2005 and increased the dividend by a massive 85pc to 1.20, compared with 0.65 a year earlier, the German government was setting out how it proposed to incorporate the European Union directive on takeovers into domestic law. The Duchy of Luxembourg, which has appointed investment bank JP Morgan to advise it, has never had a takeover code. Its position in the current hostile Mittal bid is that Arcelor is not only headquartered in the Duchy but is also the biggest single employer with 5,990 staff. The government itself is one of the largest single shareholders in the steel giant. Luxembourg has indicated that it could make some of its proposed new takeover laws retrospective to cover the Arcelor bid if the need should arise. Guy Doll, chief executive of Arcelor, insisted yesterday that the big rise in the dividend was not an attempt to keep shareholders on side and against the Mittal bid. He argued that compared with other similar companies the 2005 annual financial figures were "outstanding, but not exceptional results". Arcelor reported a 66pc rise in annual net profits of 3.8 billion. However, in what might be seen as a coded message not to interfere too much to ministers in Luxembourg, France and Germany, where the Mittal bid has been strongly criticised, Mr Doll added: "The best poison pill is the efficiency of the company and the evidence of our results." Over the next two weeks, Mr Doll and his board colleagues and company advisers are to embark on a series of meetings with major shareholders such as Gartmore and Sanford Bernstein. The Arcelor boss said he was sceptical about Mittal's claim that it has received support from these shareholders. He also made it clear that Mittal would have to come back with a substantially higher offer and in cash rather than the present mix of cash and paper.

For some reason , France and Luxembourg are apprehensive about the bid . They are grasping at straws to keep ownership . It has gone to the point where some people said that "monkay man" was taking over Arcelor . Others made cartoons depicting Mittal as Mohammed ( like the Danish ones ) , saying that "Mohammed has taken over Arcelor" .

The market has already spoken ( the value of both companies rose by $ 25 billion after news of the bid ) in facour of the bid . Mittal claims that the shareholders support him .

To me , this opposition smacks of racism ( specially when the part where the Arcelor CEO slams the phone down on Mittal when Mittal called him).

Luxembourg-based steelmaker Arcelor SA's board has rejected a hostile takeover bid from Mittal Steel Co, saying it would hurt the Group, its shareholders, employees and the customers. According to the companys statement, After a thorough review and analysis of the elements at its disposal, the board has swiftly concluded that Arcelor and Mittal Steel do not share the same strategic vision, business model and values. The board of directors has resolved that it unanimously rejects Mittal Steel's unsolicited proposal which it considers hostile.

Arcelor asked shareholders not to tender their shares in the offer, which values them at $24.50 each. Mittal, the world's No 1 steel company launched a hostile takeover bid for its closest rival on 27th of this month. Mittal said the deal would create the world's first 100 million ton-plus steel producer, with a market capitalization of $40 billion. It anticipated annual synergies of $1 billion.

The Arcelor board said it believed its current strategy offered the best guarantee of value creation for its shareholders. The Luxembourg Government, the largest shareholder in Arcelor SA, voiced concerns about the bid, citing Mittal's failure to consult with Luxembourg or Arcelor's management.

Luxembourg Budget Minister Luc Frieden and Economy Minister Jeannot Krecke said in a joint statement that they were concerned about "the apparent hostile nature of the bid" and the lack of guarantees over employment and investment in the principality.

Luxembourg holds 5.6 percent of Arcelor's shares. Arcelor is the principality's largest employer with 6,000 workers. In order to resolve the issue, Mittal Steels Chief Executive Officer, Lakshmi Mittal is due to meet Luxembourg's Prime Minister Jean-Claude Juncker on 31st of this month.

Mittal Steel- the largest producer of steel in terms of volume. Despite the fact that Mittal steel is based in Netherlands, it is perceived that the company is non-European because its CEO Lakshmi Mittal is Indian. Arcelor- Headquartered in Luxembourg, the merger of three steel companies- Aceralia, Arbed and Usinor led to the creation of Arcelor. In 2005, Arcelor had revenues of 32 billion Euros.

2. The original bid In January 2006, Mittal Steel launched a $22.7 billion offer to Arcelors 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. (Ultimately the power to buy or sell the shares rests with the shareholder and the company management can at best advice its shareholders whether to accept or reject the bid) 3. Consolidation in the steel industry- inevitable:

The steel industry is highly fragmented, the top 5 manufacturers in the steel industry account for less than 25 percent of the market (to put that in perspective, the corresponding figure for the automotive industry is 73 percent). LN Mittal believes that the consolidation will end with three of four major companies dominating the industry around 2010.

Bigger steel manufacturers have better bargaining powers against customers (such as as auto manufacturers) and against suppliers (iron ore).

Consolidation helps in comapnies improving their sourcing of raw materials; access to more markets, better utilization, more flexibility in production scheduling and better efficiency.

4. The Controversy Arcelor Management: The management believed that Arcelor itself would have been doing the acquisitions and not the other way around. The management was extremely hostile to Mittal Steels bid from the beginning. Arcelor repeatedly played the patriotic card in order for shareholders to reject the bid. The CEO of Arcelor dismissed Mittal Steel as a company of Indians and unworthy of taking over a European company. (all this despite the fact that most industry analysts and investment banks pointing out that the deal was in Arcelors best interests)

European Governments: The French government (despite not being a shareholder) was against the deal because of worries over its 28000 Arcelor employees. Despite repeated assurances from Mittal that the deal would not lead to layoffs the government of France was never convinced.

The government of Luxembourg (a stakeholder) was against the deal as well for a variety of reasons. The European Union approved of the Mittal-Arcelor deal. 5. Moves by Arcelor to counter the bid by Mittal: Declaration of Dividend: On February 16, Arcelor declared a dividend of 1.2 Euros, which was 85 percent higher than the previous dividend in 2004. This was seen as an attempt by the company to convince shareholders that the situation under the current management was extremely positive. Many analysts accused the company of creative accounting. The Russian Angle: In an attempt to thwart the offer from Mittal Steel, Arcelor released a 13 billion Euro merger plan with Severstal, a Russian company. This merger would have made the new Severstal-Arcelor entity too big for Mittal Steel to buy. Despite the merger plan being fraught with loopholes, the Arcelor management tried to convince shareholders that this was the best deal for them. The shareholders however rejected the merger with not one shareholder voting in favour of the merger. 6. Role of Guy Dolle (then CEO of Arcelor) Mr. Dolles reaction to the Mittal bid led to widespread criticism of his actions. Analysts believe that Guy Dolle had issues with the personality of LN Mittal. As the controversy panned out, Dolle raised several issues including the management of Mittal (Aditya Mittal, son of LN Mittal is on the board). Dolle also raised a number of issues about the safety record of Mittal and also repeatedly pointed out that Arcelor was absolute key to Europes economic health. Guy Dolle is not a part of the new Arcelor-Mittal organization. 7)The stance of the Indian Government o Most Indians were of the opinion that the deal was not getting pushed through because of Lakshmi Mittals nationality. o The Indian government raised the issue at several forums especially through commerce minister Kamal Nath. It was also alleged that India had threatened not to ratify a taxation accord with Luxembourg due to the latters opposition to the deal.

The irony is that LN Mittal himself felt that there was no case of racism here as Mittal Steel was a European company and NOT an Indian one.

8. End Result The deal was finally clinched when the shareholders of Arcelor agreed to Mittal Steels offer ending the transaction that had dragged on for months. Mittal had to however considerably sweeten the initial offer. Under severe pressure to counteract the Arcelor- Severstal merger, Mittal had to raise 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. The consolidation phase is well and truly underway.

Changing the steel landscape in World

The birth of Arcelor Mittal affected the global steel industry, and financial markets around the world, almost immediately, and Asia was no exception. Stocks of most Asian steelmakers rose sharply as investors speculated that the new behemoth would create pressure for more aggressive transnational consolidation elsewhere in the world, in spite of the fact that Arcelor Mittal has relatively little presence in Asia at the moment. Exceptions include an Arcelor alliance with world No 3 (now No 2) Nippon Steel, and a Mittal plant in Kazakhstan; Arcelor had also been pursuing tie-ups with Chinese steelmakers. Nippon Steel declined to comment on the Arcelor merger , according to Reuters; the company's contract with Arcelor allows either side to sever the alliance in the event of a takeover of either firm. In February, Nippon Steel president Akio Mimura said his company could prevent Arcelor from using various technologies it has provided to Arcelor as part of their alliance in the event of an Arcelor takeover, but had not decided then whether and how it would do so. On Monday, Nippon Steel shares were up as much as 1.22%. JFE Holdings, Japan's second-largest steel company and the world's fifth-largest, was up 0.22%, and Sumitomo Metal Industries gained as much as 1.33%. In South Korea, shares of the top steelmaker and the world's fourth-largest, Posco, were up as much as 3.02% in Monday trading. Yoji Takeda, vice president of RBC Investment Management in Hong Kong, speculated in an interview with MarketWatch that "there's a possibility that Mittal will come to Asia", adding: "The valuations of Asian steel companies are not expensive at all, and considering the growth opportunities, it could happen." According to Takeda, likely takeover targets would be large producers in Japan and South Korea. However, he also felt that Mittal would likely wait before making another large acquisition in the wake of the Arcelor deal. China has been considered by many as the key question for the international steel industry going forward, inasmuch as the country is now one of the world's biggest producers and users, accounting for a third of global output, and has just in the past few years become one of its most important exporters. The Chinese government has adopted a policy of

consolidation and phasing out smaller, older steel mills; pressure on weaker players has only increased in view of the recent acceptance by Chinese steelmakers of a 19% increase in ironore prices. Though it appeared unlikely in the short term that Arcelor Mittal would seek new acquisitions in China, there is a clear possibility that the merger may pressure the Chinese industry to further accelerate and deepen the consolidation trend already under way. In Monday trading, Hong Kong-listed Angang New Steel gained as much as 2.15%; on the Shenzhen exchange, Beijing Shougang was up 2.5%. The Arcelor Mittal effect could also be seen on the Indian bourse, with metals and commodity stocks broadly higher. An increase in the BSE index on Sunday was led by Tata Steel