Post on 05-Apr-2018
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V.MADHURI
I-M.B.A
BY
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A merger happens when two firms, often of
about the same size, agree to go forward as asingle new company rather than remain
separately owned and operated.
An acquisition is the purchase of one business or
company by another company or other
business entity.
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Consumption of steel increased after 1950 and trend wascontinued till 1970
Consumption of steel started decline from 70s to 80s
After 80s, demand for steel increased continually
International Iron and Steel Institute (IISI) forecasted incrementin demand for steel from 1.32 billion tones (in 2010)to 1.62billion tones(in 2015)
This demand will increase due to countries like India and china
To capture this demand, biggest steel producer of India (TATASteel ltd.) has been increased its production base by acquiring4th largest steel producer of world(Corus steel)
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MITTAL STEEL: Mittal steel is the largest producer of
steel in terms of volume and also largestin turnover.
Despite Mittal steel industry is based inNetherlands, it is perceived that the thecompany is non- european because itsCEO, Lakshmi Mittal, is Indian.
ARCELOR:
Was the largest producer of steel interms of turnover.
Second largest in terms of steel output. Created by the merger of three
companies: Aceralia(Spain),Arbed(Luxembourg), Usinor(France)
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The acquisition of Arcelorby Mittal steel led to thecreation of Arcelor- Mittal ,
the largest steelmaker in theworld. It has been one of themost controversial businessdeals ever. When the
European steel maker bowedby the Mittal steel.
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In January 2006 Mittal steeloffers to the shareholders of
Arcelor to create the worlds first100million tone plus steel
producer.
And launched a 22.7 billiondollars offer to Arcelorshareholders.
In June 2006 Mittal and Arcelorreach an agreement to combinethe two companies in a merger ofequals.
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The Arcelor believe that it should acquire other
companies rather than the other way around. Themanagement was extremely hostile to Mittal steelsbid from the beginning. Arcelor repeatedly playedthe patriotic card to convience shareholders toreject the bid. The CEO of Arcelor dismissed Mittal
steel as a company of Indian and unworthy of takingof a European company.The France government was against a deal becauseof worries over the future of 28000 Arceloremployees.
The government of Luxembourg was against a dealas well for a variety a reasons.However all these attempts went wrong when theEuropean Union approved the Mittal-Arcelor deal.
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Most Indians were of the
opinion that the deal was notgetting pushed through becauseof Mittals nationality.
The Indian government raisedthe issue at several forums,especially through CommerceMinister Kamal Nath.
There were allegations that Indiahad threatened not to ratify ataxation accord withLuxembourg due to the lattersopposition to the deal.
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The deal was finally clinchedwhen the share holders ofArcelor agreed to Mittal steels
offer.Mittal steel had to raised itsvaluation of Arcelor to 32.9combined company holds 10%of the global market for steel.
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Mittal- Arcelor the new entity willbe based on Arcelors industrialmodel.
It has been decided that themanagement board will have
seven members, four from Acelorand three nominal from Mittalsteel.
L. Mittal is the CEO and Josephkinsch from Arcelor is the
president of the company. The Mittal family has the 43%
stake on the new entity Arcelor-Mittal.
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Worlds 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
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CommunicationCommon culture
Training and development
Mutual respectIndividual counseling
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SUMMARY
Initially mittal launched an offer of 22.7 billiondollars to acquire arcelor
Arcelor tried many tactics to reject the offerMoreover they declared the increase in thedividend by 85%
But finally the merger happened at thevaluation of 32.2 billion dollars
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conclusion
The business strategy that has made the mittal-
arcelor steel the worlds 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 aregional business.
Mittal steel persued its vision of becoming a global giant
Q S O S
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QUESTIONS.
1. Why did the French government oppose theacquisition of Arcelor by Mittal steel?
Worried about the employees of the
arcelor
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QUESTIONS
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QUESTIONS.
3. What influence tactics did Mittal employ to clinchedthe deal?
INCREASED THE VALUATION OF ARCELOR
TO 25.8 BILLION EUROS(32.9 US BILLIONDOLLARS)
QUESTIONS
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QUESTIONS..
4. Discuss Mittals tenacity in the power struggle forthe 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