Acquisition of - Copy

7/31/2019 Acquisition of - Copy

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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

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