Mergers, Acquisitions and Takeovers Case Study

LNM and ONGC: Creating Global Energy Powerhouse

OR

Abstract:
In July 2005, Laxmi Niwas Mittal, chairman of world’s largest steel company, LNM group and Subir Raha, chairman of India’s largest oil producing company, ONGC signed an agreement to float two Cyprus based companies (ONGC-Mittal Energy Ltd and ONGC-Mittal Energy Services Ltd) in order to acquire overseas oil and gas assets and energy related businesses. The deal would help the two companies to set up an energy consortium globally. The two new entities would take up projects related to exploration, development, production, evacuation and related consequential processing of hydrocarbons, in the form of oil, condensates and gas (including LNG). These activities would be carried out in 25 countries where LNM group had strong presence. For ONGC, the new strategy was to lay a strong foothold in a number of lucrative acreages, against stiff competition from international oil companies, in the Middle East, Central Asia and East European countries. For the LNM group, which had capitalised on the steel boom, it was a move onto yet another ‘hot’ commodity, oil and gas. But, its first futile bid for PetroKazakhstan proved that LNM’s business influence would not work wonders all the time and it was not also at par with global oil majors like Chevron, BP and Exxon-Mobil. ONGC-Mittal Energy Ltd would bid for Kurmangazy oilfield in late 2005. Industry analysts, across the globe and major oil companies were keeping a close watch to see how successful the joint venture would turn out to be over time.

Pedagogical Objectives:

• To understand the changing dynamics of global steel industry and oil and gas industry
• To understand the concept of Special Purpose Vehicle (SPV)
• To understand when a company opt for diversification strategy
• To understand how to integrate two different company from two different industry
• To understand how to make an alliance a successful one
• To understand the problems of making an alliance work
• To understand the upstream and down stream activities of global energy industry.

Keywords : Mergers,Acquisitions,Alliances Case Study;ONGC (Oil and Natural Gas Corporation); Mittal Steel; Laxmi Mittal; Ispat Industries; Mittal ONGC deal; LNM (Laxmi Niwas Mittal) Group; ONGC Mittal Energy Limited; Kurmangazy oilfield; BP (British Petroleum); Satpayev

Contents : 
L N Mittal: Indian Roots, Global Ambition
Oil And Natural Gas Corporation Ltd (Ongc)
The Mittal Steel Empire
Crude Oil And Natural Gas Production Of Ongc
Global Consumption, Production And Reserves Of Oil & Gas