Professional Documents
Culture Documents
Merger
Merger
Merger
NAGABHUSHAN 12/11/2010
Type Subsidiary
Arbed in 1911
Aceralia in 1902
Founded Usinor in 1948
Arcelor on 18 February
2002
Luxembourg City,
Headquarters
Luxembourg
Key people Guy Dolle
Industry Steel
Products Steel
Revenue € 32.611 billion (2005)
Employees
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•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.
Founded 2006
Avenue de la Liberté, Luxembourg,
Headquarters
Luxembourg
Area served Worldwide
Lakshmi Mittal (Chairman of the
Key people board and CEO)
Aditya Mittal (CFO)
Industry Steel
Steel, flat steel products, long steel
Products products, stainless steel, wire
solutions, plates
Revenue US $124.9 billion (2008)
Operating income ▲ US $12.24 billion (2008)
Profit ▲ US $9.399 billion (2008)
Total assets US $133.1 billion (2008)
Total equity US $59.23 billion (2008)
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Employees 315,900 (2008) 12/11/2010
ARCELOR MITTAL
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It employs 310,000 employees in more
than 60 countries
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BRAND AND PHILOSOPHY
•Sustainability
•Quality
•Leadership
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THE BIG DEAL
The deal was split between Mittal Shares (75 percent) and
cash (25 percent)
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THE CONTROVERSY
Arcelor Management –
• The management was extremely hostile to Mittal Steel’s
bid
• It believed to have been doing the acquisitions and not the
other way around
• The CEO of Arcelor dismissed Mittal Steel as a “company
of Indians”
European governments –
• The French Government and the government of
Luxembourg was against the deal
• The European Union approved of the deal
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MOVES BY ARCELOR TO COUNTER
THE BID
Declaration of dividend –
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FINANCIAL ASPECTS
Increase in revenue of the company from $28.123 billion to $105.2 billion
and operating income from $4.746 billion to $14.83 billion
Profit of the company has risen from $3.36 billion to $10.36 billion
High monetary cost of the target company (Arcelor) which is $32.9 billion
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PORTER’S FIVE FORCE MODEL
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3) Absolute cost advantage:- Established companies such as
ArcelorMittal Steel has absolute cost advantage over new entrants
because of its :
1)Superior production
2)It gave lower cost for input materials as it acquired the iron and
coal mines
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Rivalry among established competitors:-
1)By acquiring large number of Steel Companies Mittal Steel became
large and powerful and gained more control on price.
2) Large number of steel industries are in government hands.
Management of these companies find it difficult to compete with private
players such as Mittal Steel.
3)Since Mittal Steel was ready to acquire the sick government units it
gave an easy exit barrier to these industries and weakened the
competition.
4)Other big players were present in the market. But Mittal Steel
concentrated on its low price strategy(mostly in Asia and Africa) while
many of its competitors competed for higher quality(mostly in Europe)
and better distribution channel.
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Buyer Power:
It buyers are appliance (white goods), automotive (passenger
vehicles,trucks, auto components ), building and construction
(including housing and infrastructure),fabrication (sheet steel and
metal fabricating industry), oil and gas(including pipeline), packaging
(tin plate, tin-free and aluminum ), rail transport and marine
shipbuilding industries.
1) Building and construction, fabrication, oil and gas and packaging
industries are fragmented so they have less bargaining power.
2)Although, some of the buyers are large players but in comparison to
large steel industries they are dwarfed in size. Comparatively they
have less bargaining power.
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Supplier Power
Since coal and iron mines are large in size and few in number and
controlled by large player, their bargaining power can significantly effect
the steel industry business.
1) Mittal Steel adopted the strategy ,before acquiring any industries, they
first ensured the iron ore and coal supply from mines.
2) Mittal Steel buys a large chunk of supply from its suppliers and retains
the bargaining power to itself.
Threat of Substitute
1) Steel has currently no substitute at its price level.
2) At some places(utensils, white goods) steel can be substituted by natural
fibers and other metals but that is at very small scale.
3) Due to new emerging markets such as China, India, South East Asia
consumption of steel have risen sharply in recent decades.
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Legal Complexities
1. Multinational Jurisdiction
4. Shareholder resolutions
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Multi-jurisdictional offer
• The offer was governed by takeover regulations all the jurisdictions
in which Arcelor’s securities were listed (Belgium, France,
Luxembourg and Spain).
• Thus, the offer also had to comply with US Securities and Exchange
Commission (SEC) rules and regulations, and the offer document
(share listing prospectus) required the approval of the SEC and the
Dutch securities regulator.
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European Council Directive
* 2004/25/EC
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•Arcelor was the first Luxembourg-resident target of a hostile
takeover offer and this meant that politicians considering draft
legislation implementing the Takeovers Directive watched the deal
closely.
•As part of its bid defence, Arcelor lobbied for amendments that
would have assisted hostile targets, including provisions that would
have required shares offered in an exchange or partial exchange
offer to satisfy minimum liquidity requirements
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Anti-Competition issues
•Competition/anti-trust filings were required in the EU, the US,
Canada and elsewhere
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White knight defense and
shareholder revolt
Instead of being structured as a competing bid, the deal was
structured as a contribution of assets by Mr Mordashov in return
for shares in Arcelor. This meant that the consideration shares could
be issued under existing delegations to the Arcelor board of
directors, and without the need to seek approval from Arcelor
shareholders.
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This was a much higher threshold than is usual for shareholder approval
(typically, two-thirds of shareholders present and voting) and, in practice, a
veto seemed unlikely, as attendance at past meetings had never been above
35%.
The arrangements triggered a shareholder revolt, with between 20 to 30% of
Arcelor’s shareholders signing a letter to Arcelor demanding the right to
choose between the Severstal and Mittal proposals.
An intense period of negotiations with Mittal followed, culminating in the
announcement of the agreed memorandum of understanding between
Arcelor and Mittal and the Arcelor board’s recommendation of Mittal’s offer
on 25 June 2006.
On 26 July 2006, Mittal was able to announce that 92% of Arcelor’s shares
had been tendered in response to its offer. It is intended that Mittal will
formally merge into Arcelor later in 2007. On 30 June 2006, Arcelor
shareholders holding about 58% of the outstanding share capital voted
against the proposed Severstal merger at a rescheduled meeting. It is perhaps
in this regard that the practical legacy of the deal in Europe will be most
notable
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LAKSHMI MITTAL
CEO & Chairman
ADITYA MITTAL JOSEPH
CFO KINSCH
Member of the Group Member of the
Management Board Group
Management
Board
GONZALO
MICHEL WURTH URQUIJO
Member of the Group Member of the
Group Management
Management Board
Board
MALAY MUKHERJEE
Member of the Group
NAGABHUSHAN Management Board 12/11/2010
CONCLUSION
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