A case study of

Presented by :
SUDHEENDRA M
MUNAVAR AHMAD
Introduction:

 ArcelorMittal is a global steel company headquartered in Avenue de la

Liberté, Luxembourg, Luxembourg. It is the largest steel producing
company in the world and is the market leader in steel for use in
automotive, construction, household appliances and packaging.

 It holds sizeable captive supplies of raw materials and operates extensive

distribution networks. The company was formed in 2006 by the merger of
Arcelor and Mittal Steel. It ranks 99th on the 2010 Fortune Global 500 list.
 Arcelor 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) and Arbed (Luxembourg) in 2002.

 Arcelor is now part of Arcelor Mittal.

 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 of ArcelorMittal.

 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.
Arcelor merge with Mittal Steel

 The company was the target of a takeover bid by its rival Mittal Steel on 2006-01-
27. 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.

 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 Steel and 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

 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.
Reaction to the takeover
 Arcelor's directors strongly opposed the takeover, with Arcelor's chief
executive at that time, Guy Dollé, even dismissing Mittal as a "company of
Indians“. The French, Luxembourg and Spanish governments strongly
opposed the takeover.

 The Belgian government on the other hand declared its stance as neutral
and invited both parties to deliver a business plan with the future
investments in research in the Belgian steel plants.

 The French opposition was initially very fierce and has been criticized in
the British, American and Indian media as double standards and economic
nationalism in Europe.

 Indian commerce minister Kamal Nath warned that any attempt by France
to block the deal would lead to a trade war between India and France.
 On June 20, the above claim by economists was confirmed when Severstal
increased its valuation of Arcelor. Management of Arcelor had in fact
undervalued the company itself. The capability of management which had
openly supported the previous valuation of Arcelor came into question.

 Further the combined markets of France, Belgium, Luxembourg and Spain

chided Arcelor management and suspended trading of its stock.

 On June 26, the Board of Directors recommended the approval of the

improved Mittal offer (49% improvement compared to the initial offer with
108% improvement of the cash component), proposed the creation of
Arcelor-Mittal with industrial and corporate governance model based on
Arcelor and scheduled a corporate meeting for June 30 to vote on this.
Reason for The Merger
• Mittal Steel offers to the shareholders of Arcelor to create the
world's first 100 million tonne plus steel producer.

• Mittal Steel and Arcelor reach an agreement to combine the

two companies in a merger of equals.

• The terms of the transaction were reviewed by the Boards of

Arcelor and Mittal Steel.
• And they recommended the transaction to their shareholders.
The combined group, domiciled and headquartered in
Luxembourg, is named Arcelor Mittal.
Objectives of The Merger
 To create the world's largest steel
company
 Increase in economies of scale.
 Decreased competition and increased
market share
Current Situation
 The Merger has been very successful .
 After the merger, the company has
 ventured into new businesses and market
like Luxembourg, Senegal , Liberia .
  Profit of the company has risen from
$3.36 billion to $10.36 billion.
 Enlarged Brand Portfolio.