Mergers, Acquisitions and Takeovers Case Study

Mittal’s Biggest Gamble: Bid for Arcelor

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Abstract:
On January 26, 2006, Laxmi Niwas Mittal (popularly known as LNM), Chairman and CEO of Mittal Steel, the world’s largest steel company, made a bid for Arcelor SA, (the world’s second largest steel company). In the era, when consolidations and acquisitions were common practices in the industry, Mittal Steel’s new move was expected to help it in consolidating its presence more aggressively. The proposed acquisition price of US$ 23 billion, was the biggest in the global steel industry. The proposal was, however, strongly opposed by Arcelor’s management and the entire Europe was divided on the issue. Since Mittal Steel produced cologne, Arcelor, being the producer of perfumes only, claimed that the merger between the two companies was not possible. Even the French Government and Luxembourg Government strongly opposed Mittal Steel’s move. The concept of corporate xenophobia followed the move. While LNM defended the move from the point of view of the benefit of the global steel industry and identified in it the geographic, commercial, manufacturing and operational synergies, Arcelor denied it. The French and Luxembourg governments, moreover, accused LNM for poor management style and were afraid that the acquisition would result in job loss. The case study offers a scope for discussing the rationale of the acquisition in the recent global trends, the value chain of the industry and how Mittal Steel plans to leverage it. The case study also allows the discussion of how Mittal Steel can leverage the acquisition by strengthening its position across the globe.

Pedagogical Objectives:

• To discuss the trends, patterns of global steel industry and consolidation as a major strategy in fragmented steel industry globally
• To discuss acquisition process of Arcelor, the largest steel company of Europe and second largest globally by Mittal Steel, potential synergies and problems associated with the acquisition
• To discuss how acquisition as a growth strategy help companies to consolidate in fragmented steel industry
• To discuss the key factors which make an acquisition a successful one
• To discuss in details about the problems of acquisition and how the maximum leverage can be gained
• To discuss, the bidding process and funding of an acquisition.

Keywords : Mergers,Acquisitions,Alliances Case Study;Mittal Steel; Arcelor; Consolidation; Globalisation; Value chain; Hostile takeover; Black knight; Poison pill; Global steel industry; Corporate xenophobia; Operational synergies; Acquisition; Primary steel; Secondary steel; Global value chain

Contents : 
Mittal Steel: Expanding Globally
Arcelor S.A.: The Second Largest
Consolidation: A Major Strategy In The Global Steel
Expected Synergy: The New Mittal Steel
Mittal’s Bid That Rocked Europe: Corporate Xenophobia
Mittal- Arcelor Bid: ‘Oui Or Non’
Steel Kings: World’s Biggest Crude Steel Producers
The Mittal Steel Empire
Sources Of Expected Cost Synergies