MERGER & ACQUISITION

THE MAJOR ORGANIZATION

CHANGE
A MERGER IS A TRANSACTION THAT RESULTS IN
THE TRANSFER OF OWNERSHIP AND CONTROL
OF A CORPORATION.
TYPES OF MERGERS
HORIZONTAL MERGERS
VERTICAL MERGER
CONGLOMERATE MERGER
 ACQUISITION
 An Acquisition (takeover) is buying of one company
(target) by another

 An Acquisition may be friendly or hostile

 An Acquisition can be a ‘Reverse Takeover’

 Acquisitions can be done in two ways –

 the buyer buys the shares of the target company
 the buyer buys the assets of the target company

 There are pros and cons involved in every take over

ACQUISITION OF ARCELOR STEEL
BY MITTAL STEEL
Mittal Steel
 Mittal Steel Company N.V. was formed
by the merger of

1. LNM holdings & ISPAT International

2. International Steel Group Inc.

 CEO Lakshmi Mittal’s family owned 88% of

the company and its headquarter was in
Rotterdam, Netherlands

 The company was the world’s largest steel

producer by volume and also the largest in L.N. Mittal
turnover and is now a part of ArcelorMittal

 It was the major player in Steel, Flat Steel

products, Coated Steel, Tubes and Pipes
Arcelor
 Arcelor was created through the merger of

1. Arbed (Luxembourg)

2. Aceralia (Spain)

3. Usinor (France)

 Merger was launched on 19 February 2001

 Choice of Arcelor name was announced on 12

Guy Dolle
December 2001

 It was a major player in all its main markets:

automotive, construction, metal processing, etc

 Guy Dolle was the CEO of Arcelor

 THE BIG DEAL
 In January 2006, Mittal Steel launched a $22.7 billion offer
to Arcelor’s 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
TOP PRODUCERS OF STEEL (VOLUME)
AROUND
THE GLOBE in 2005
 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
 MOVES BY ARCELOR TO
COUNTER THE BID
 Declaration of dividend –

On February 16, Arcelor declared a dividend of 1.2 Euros to

convince the shareholders of a positive situation under current
management

 The Russian Angle –

From Mittal Steel, Arcelor released a 13 billion Euro merger plan

with Severstal, a Russian company
 ROLE OF GUY DOLLE
 Analysts believe that Guy Dolle had issues
with the personality and management of LN
Mittal

 Guy Dolle raised several issues about the

safety record of Mittal

Guy Dolle is not a part of the new Arcelor-

Mittal organization
 THE STANCE OF INDIAN
GOVERNMENT
 Most Indians believed that the deal was not getting
pushed because of Lakshmi Mittal’s nationality

 The Indian government raised the issue through

commerce minister Kamal Nath

 LN Mittal himself felt that there was no case of

“racism” here as Mittal Steel was a European company
and NOT an Indian one
 END RESULT- THE
FINAL DEAL
 On 25th June, 2006 the deal finally
clinched when the shareholders of Arcelor
agreed to Mittal Steel’s offer

 Mittal had to considerably sweeten

the initial offer-by raising 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
ARCELOR MITTAL
 Arcelor Mittal is now the largest steel
company in the world

 ArcelorMittal is the leader in major global

markets, including automotive, Headquarters at
construction, household appliances Luxembourg city
& packaging

 The company is headquartered in southern

Luxembourg City, the former seat of
Arcelor

 Lakshmi Mittal (owner of Mittal Steel), a

non-resident Indian is the Chairman and CEO
 It employs 310,000 employees in
more than 60 countries

 ArcelorMittal key financials for

2007 show revenues of US$ 105.2
billion

 A crude steel production of 116

million tones, representing around
10% of world steel output

 As of May 17 2008, the market

capitalization of ArcelorMittal was
$144.37 billion
ADITYA MITTAL JOSEPH KINSCH
CFO Member of the
Member of the Group Management
Group Management Board
Board

MICHEL WURTH GONZALO URQUIJO

Member of the Group Member of the Group
Management Board Management Board

MALAY MUKHERJEE
Member of the Group
Management Board
A STEEL PLANT
COLD ROLLING MILLS

HOT ROLLING MILLS

 ELECTRIC ARC FURNACE
DOFASCO COILS
 CONTROL ROOM STOCK CONTROL

QUALITY CONTROL QUALITY CONTROL

 ROLLS STOCK SEMI FINISHED PRODUCTS

STAINLESS STEEL
SHEET PILLING
BRAND AND PHILOSOPHY
 ArcelorMittal's brand promise is
'transforming tomorrow',
underpinned by a
consistent set of values:

Sustainability

Quality

Leadership

 Company’s goal is to provide the

leadership that will transform
tomorrow's steel industry
 THE PROS AND CONS OF THE
According to us the deal has been in favor of both the companies.
DEAL
This can be suggested by the following PROS of the deal –

 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

 Venture into new businesses and market like Luxembourg, Senegal,

Liberia and looking to develop positions in the high-growth Chinese
and Indian markets

 Profit of the company has risen from $3.36 billion to $10.36 billion

 Decreased competition and increased market share

 Enlarged brand portfolio

 Increase in economies of scale and share value.

The CONS of the deal include –

 High monetary cost of the target company (Arcelor) which

is $32.9 billion

As the pros of the deal completely

outweigh the cons involved, it can be said
that the deal has been a successful one for
both the companies, its people and the
world.