Arcelor-Mittal merger

There was a long drawn out battle for acquisition or merger between Mittal Steel and European giant Arcelor. It was perhaps the most rabble rousing industrial controversy of the recent times. It raised passions. Some parties betrayed their ugly racial attitudes. There were frayed tempers and words below dignity uttered or plainly abusive language used. Natural rivalries also occured and heads of the states got invloved. Politicians pitched in from both sides. It almost became whites versus coloureds. Amidst all the heat, dust, bad feelings and illtempered words Laxmi mittal stood composed and unruffled like dignity and civility personified.
To understand the issue clearly it would be proper to know the background of Arcelor and Mittal Steel. They were two global giants of steel industry and naturally business rivals in fierce competition. Their coming together to become one entity was an incredible development of the steel industry. But how did it happen and whose idea it was anyway? These questions puzzled everyone.
The idea was the brainchild of Laxmi Mittal. During his journey through steel business till 2004 he felt that the steel production of the organised sector was very low. The unorganised small scale steel sector was producing three times more. It was affecting the quality of the steel.There was a great divide between 75% producer unorganised sector and the 25% producer organised sector. Laxmi Mittal was infact thinking of entire global scene and the total steel production of organised plants of the upgraded quality. He wanted the modern steel plants to have greater share of cap. So, for the production of high quality steel at global level a new thinking and approach was required. Remaining trapped in the group competitions was not benefiting them in a collective way. He exchanged views on this point with his son Aditya. Then Mittal Steel was at No. 1 position and Arcelor was at the second spot. The young Mittal agreed that the merger of Mittal Steel and Arcelor would grealty benefit the organised steel sector.
There was a great reality in this thinking but risks were also incalculable. In profit making Arcelor was far ahead of Mittal Steel. In technology as well Arcelor was superior. Areclor company was based in Luxembourg. The idea of the super merger was contemplated upon with a cool mind. It was not merely a question of merger or acquisition but a gamble which could centralise the global steel industry.
But it was tall order then to persuade Arcelor for the merger with Mittal Steel. It was also a steel super power and it could not tolerate any talk of getting into talks for merger especially with Mittal Steel that only specialised in acquiring sick and shut down steel plants to make giant and a roaring industry. It was completely a new scenario and the idea of merger was an unprecedented concept. Every step needed to be carefully treaded.
The suggestion of Aditya Mittal echoed a wish and a feeling for safeguarding the future of the steel industry at global level. The father-son duo made up their minds to give this innovative idea a try. But before giving account of the entire game we must make a comparative study of the then status of both the groups, Arcelor and Mittal.
Arcelor before merger
Arcelor came into existence on December 12, 2001 as an outcome of the merger of three big steel campanies of Europe namely Arbed (Luxembourg), Eceralia (Spain) and Usinor (France). After merger it was listed on stock exchange on February 18, 2002 as Arcelor.
In 2002
In March 2002 Arcelor set up ‘Vege-De-Sol’ plant in Brazil. In steel coils cold rolled and galvanised processes were applied. It was supposed to have production capacity of 9 lac tonnes annually. It benefited by its proximity to a automobile plant having been located at Disao-Pramisisce-De-Sol in the state of Santa Catarina.
In April Arcelor and N.S.A. decisded to cooperate on global level to get flat steel and stainless steel to consumers more efficiently and at wider scale. Arcelor began producing steel with Russian Comapny Severstal. Raw steel was produced at Moscow plant and Arcelor provided galvanisation technology based on zinc plating, brand name and necessary licence.

In May Arcelor signed contract regarding constitution of European Working Committee. Its aim was to frame policies about product according to new demands to make entire European scenario transparent. Its permament office was opened at Arcelor headquarter situated at Luxembourg.
In September its Belgian plant upped the production target from 6 lac tonnes to 11 lac tonnes. To meet the target facilities were upgraded.
In October Arcelor announced its intention of selling 49% shares of Ucinor to Service Senton Group of Spain. 35% financial interests were sold to Turkish Group and 14% to Aryaski. In the plant security standards were given top priority. Two new service centres were opened in Europe to provide the consumers new ranges of products and facilities cum services.
In November an 8 lac tonne capacity hot rolling mill was set up at Coastrel.
In december Arcelor decided to buy properties of duferco in Italy. For flat carbon steel production a joint control companies vol-de-Rio-doke set up group control system.
Thus, the year of 2002 was very hectic and productive for Arcelor which greatly strengthened its position in the steel industry.
In 2003
Made plans for development of flat carbon steel plants. Gave refresher training to workers and stressed the need to inculcate industrial culture and create conducive atmosphere. Sent to European Authority
contract to sell 75.5% holdings of Segunto Steel Unit. Took decision to buy 49% shares of Gemo Rolling Mill of Duferso and sent the proposal to European Competition Authority for approval in July 2003. Arcelor signed an agreement with Bao Steel of China about ovelded blacks. It helped Arcelor lighten its carriers to reduce fuel consumption and increased safety standards. Arcelor and Ardemire of Turkey planned a joint venture policy to give a new shape to service centre of Jamlik. In December Bao Steel of China, Nippon of Japan and Arcelor made joint investment of $ 800 million with respective shares of 50%, 38% and 12%.
In 2004
Prepared draft for contract for the sale of Tubewoo unit to Condessa of S.Africa in Feburary.
Proposed to sell the assets of Speciality Steel (USA). In March it was decided to sell 96% holdings of Thai Steel Cold Rolling & Finishing Plant. Thainox was assured of supplies at the market rates for its basic requirements.
In April Arcelor decided to sell its total holdings of South African SAS (ADA) undertaking. British firm Corus Steel Sheet Works was acquired. Lux-2006 plan was approved and decision was taken to modernise Laung carbon steel plants and increase the production.
Arcelor’s Brazil Partner CSSDT agreed to increase investment in June.
In July the group decided to sell 36% holdings of International Metal Services.
August : Signed a contract welth SAW Pirus Ltd. of Indian Steel Jindal Group. According to it two plans were worked out for production and distribution of high grade pure steel and nickel used in textile machinery, watch manufacture and electircal equipments.
A joint venture was started with Nippon and Bao Steel to produce galvanised steel for use in automotive industry.
October : Arcelor share in capital investement in Brazilian steel company contracted CST incerased to 73-74%. It got Arcelor greater hold in CST group and it gained the right to have a say in policy decisions.
In 2005
February : Concerned with global warming Arcelor joined other 48 campanies to work in researches aimed at reducing carbondioxide pollution. Target was set to cut down carbon footprint by 30-70%. All agreed to use ultra-modern technology to achieve this accepting the global social responsibilities at priority basis. It was hoped that CO2 emission will be reduced by 50% in next 5 years, up a new mill at Luxembourg.
March : Bao Steel NSA and Arcelor jointly set up an 8 lac ton capacity galvanised steel plant at Shanghai.
Blast furnace of CST production went up to 70 million tonnes.
April : Agreement reached at to sell three bar and mesh plants to Spanish company Alfaso Geraldo.
May : Dutch company De Boer acquired. It produced pipes used in port construction. They were useful in flood control works tools. It was decided to set up a small plant in USA.
June : Set up stainless steel tube plant in Euros 15 million in Czech Republic.
Three new slitting machines set up in Poland for steel production with 2 lac ton annual capacity.
July : Contract to buy 50% of the steel cord production of Severstal Metals of Russia approved. A new company under this contract came up which was named Trifil Arged Russia. It helped Arcelor become second largs steel cord producer. Arcelor established business relationships in S. Korea, France, Austria, Hungary and America.
August : Arcelor aquired HVL group of Warsaw and strengthened its position in the steel world. The group produced 6 lac ton electric steel and 3 Lac ton Laung special steel annually. It could suply the goods required for Polish reconstructions.
September : Arcelor gained recognition in carrying out international human resource policies. It started a new workers welfare programme in contract with International Metal Workers Federation and European Metal Workers Federation.
Started stainless steel production in Belgium with production target set at 10 lac tonnes per year.
October : Began galvanise steel production in Mardoic plant in France with new technology. Increase of 4 lac ton production annually was proposed.
December : Galvanised Steel Plant of Severstal began production in Moscow.
Arcelor had 25% share in the plant and in Severstal 75%. Annual production target was set at 4 lac tonnes. The steel was for automotive industry.
In two campanies of Costa Rica Arcelor acquired 50% share. The plant of these companies used to make merchant bars and concrete reinforcing bars. The production was upped to 4 lac tonnes yearly target.
Arceor Brazil as corporation started production of flat steel and long carbon steel. The total output is 11 million tonnes. It had 5 production units in Brazil and Argentina. The business in January 2005 was Euro 23 millions.
It can be said truthfully that Arcelor Group was very firmlly based in steel production business operating in several countries and continents. It was on the path of rapid progress just like Mittal group. In sheer profit terms Arcelor was ahead of Mittal.
Mittal group before merger
With a view of coming together with Arcelor the father and son duo of Laxmi Niwas and Aditya were very carefully assessing and analysing the comparative study of both the groups. They needed to know the true position of Arcelor. Hence, information gathering was also being carried on. After the broad portrayal to the works of Arcelor it is also appropriate that the readers must know the status of Mittal Steel as well:
❑ Mittal Steel had also established itself as a steel power at the global steel stage.
❑ It had steel works, plants and complexes in 14 countries of the world and in 11 had distribution centres.
❑ Globally Mittal Steel had 1,75,000 employess on its payrolls. They came from 48 countries.
❑ In 2004 alone Mittal steel sold 42% million tonnes on steel which was $ 22 billion business.
❑ Being listed in New York and Amsterdem stock exchanges it had global financial standing of great worth.
❑ The group aquired several
governmental and private steel enterprises and merged in itsself. Their productivity was enhanced and quality was upgraded.
❑ It earned a brand name recognition as steel supplier to automotive engineering and appliances industries. Made capital investment system practical.
❑ In the field of steel introduced high quality products in the markets of 120 countries to become a real global player.
❑ There ultramodern techniques and quality production reduced the end cost of its products and earned respect in the global markets. All products were upgraded to meet the world standards in quality.
❑ It had a production and distribution system network that was finest in the world. This connected the group to big brand name manufacturers as business partners.
❑ In steel industry introduced Direct Reduced Iron process. Purchase of raw materials in huge quantities helped it reduce the price of its end products. The group was appreciated for its new experiments.

❑ It was producing hight quality steel in USA, Mexico Algeria, Bosnia, Macedonia Kazakhstan, Poland, France, Czech Republic, Canada, Trinidad, Germany, S. Africa, Romania etc.
❑ Inspite of being globally spread enterprises it established a uniform coordination policy. International distribution centre keep lists of the demands of the consumers. According to the demand it is made possible to reform the production process.
❑ It had been representative producer of flat and long steel products and hence had been able to meet all the demands of the consumers.
❑ It had research and development centres in USA and France that provide new process or info on the latest technological developoments. The new techniques are given praticable forms for application in the plants and its facilities.

All these points prove that Mittal group was then in the top bracket of the steel industry while Arcelor was close behind at second spot in turnover and size. The merger of the two giants would throw up a totally new equation that could bring a new era in the global steel business. The industry could reach greater heights and achieve new objectives or meet bigger challenges.
Mittal group’s plants—before merger
Enterprise      Location
1. P.T. Steel Indonesia
2. Steel Annabas Algeria
3. Steel Novahut Czech Republic
4. Steel Sidex Romania
5. Polska Steel Poland
6. Inland Steel U.S.A.
7. Steel Limited S. Africa
8. I.S.G. USA
9. Mexicana Steel Mexico
10. I.H.S.W.H.R.C Germany
11. Unimetal Steel France
12. Sidback Steel Canada
13. Cormet Steel Kazakhstan
14. Krivorijestan Ukrain
15. Carribean Steel Trinidad
Distribution centres—Mittal group
1. Beijing 2. Urumki 3. Shenjhau, all China, 4. Prague, Czech Republic 5. Dubai, UAE 6. Chicago, USA, 7. Vienna, Austria, 8. Istanbul, Turkey, 9. Milan, Italy 10. Mexico City, Mexico 11. Tehran, 12. Iran, Jakarta, Indonesia 13. Budapest, Hungary, 14. Luxembourg 15. Cotavis, Poland 16. Barcelona, Spain 17. Montreal, Canada.
Mittal group produced steel products
❑ Long Steel Products : Final upgraded steel product ranges are turned over. With automative forging machining bars are made for pure engineering steel.
❑ Coated Steel : White metal steel coated for safety through galvanising process. It is specially made for the automobile industry. This light and durable product reduces the weight of the vehicle and saves fuel consumption making it economic relatively.
❑ Flat Steel : This is the main product of the steel industry. Mittal Steel produces all kinds of flat steel. Hot rolled steel is used for building constructions, ship building, engineering and petrochemicals. The cold rolled steel products are for use as raw material in automotive industry and manufacture of white goods. This finished flat product is in various forms like hot deep galvanized, alluminized free phosphated and electronised.
❑ Semi Finished Steel : It is used is making oil and gas pipelines. In various oil and gas pipeline projects they are in great demand which is on the increase as many new projects are in the pipeline. So Mittal Group was producing various diametre tubes and pipes for the varying projects.
❑ Wire Roads : The group used to produce steel wires form 0.4 mm to hight capacity steel rounders. In remaking they can be turned into various ranges of good from paper clips to suspension cables.
Breaking ice for merger proposal
That was the time when Laxmi Niwas of Mittal Group and Frenchman Guy Dolle the CEO of Arcelor group had emerged in the world steel scene as two great soldiers of the field with enviable track record of work and achievments. Both were fighters to the core and had defined enterprising capabilities of steel industry. Being on the same operational level in the same field it was natural that they often met or ran into each other. As professionals they respected each other and acted in friendly manner. The two had developed a personal relationship too as a spin off of the business.
On January 13, 2006 Guy Dolle was invited to dinner by Laxmi Mittal at his London Kensington house. The two after talking about weather and health turned to the matters related to the steel business.
For the past many weeks the mind of Laxmi Mittal was pre- occupied with thougths of the possible merger of Mittal and Arcelor. He had done an extensive home work and knew a lot about his rival’s management and financial balance sheet. Mittal had an idea that coming together of Arcelor and Mittal would mean unification of the organised steel sector which held immense possibilities for entire steel scene. Guy Dolle had no inkling that the dinner was arranged for a speacial purpose of broaching the subject of merger and Laxmi was going to present an unexpected proposal to him. Laxmi’s own mind was in turmoil. He wanted to lead the talk in a way in which Guy Dolle should not find it objectionable or impudent. He decided to feel the pulse of the Frenchman.
At dinner table after courtesy drink Laxmi Niwas led the conversation to the working and the management of Arcelor. He revealed some of his experts had been keeping an eye on the working of the Arcelor and that its financial status had been assessed in view of the possible joining of the hands by the two groups. In detail he spoke on the incredible benefits that would accrue to both the groups and how powerful it should make them. He gave the example of automobile industry where there were 60-70 companies in the field and the merger process led to only 10-12 giants left in the field to produce cheaper and better cars at large scale. He thought the steel industry shall gain the same way.
Aditya remained a silent spectator and and kept reading the face of Guy Dolle. It was a big issue and Frenchman would not agree on or accept all the assessments of Laxmi Mittal. He could view it from a totally different angle. Guy Dolle just listened silently without directly responding. Laxmi Mittal further argued that at that point of time fragmented disorganised sector was producing 80% of the annual steel production of the world and the five steel giants contributed only 20%. That situation could be reversed by merging Arcelor and Mittal in one entity.
At an opportune moment Aditya also joined his father in pressing for the point. It was pointed out that they being the top two groups bore the moral responsibility to unify the steel sector. They reasoned the Arcelor had hold on Europe while Mittal group was supreme in America. East Asia and Africa. Their coming together shall gain them control over steel business at global level. They made it clear that the merger was their own idea and a dream. The proposal put Guy Dolle in a dilemma and caused some embarrassment at the dinner table as it had come like a bolt from the blue. Infact, he had felt slighted and hurt his racial ego. Not even in his dream Guy Dolle had imagined that a brown monkey of India would dare put forward such a proposition to him. But during the dinner the Frenchman kept his feeling suppressed for the sake of country and the Indian businessman was no push over. He was called by global industrial community an ‘Acquisition Magician.’
Guy Dolle knew that Mittals had scored victory even over the might of the president of USA. He could not rudely reject the proposal and as a CEO he was not fully authorised to take such decisions about the future of the company in isolation. But Indian duo had noticed the expression of resentment and anguish on the face of the Arcelor CEO. But they had exposed their cards and could not retrace their steps for the sake of the self respect.
The proposal of Mittal had surprised and shocked Guy Dolle. But the Frenchman kept up dinner table manners showing great restraint. He only made a polite excuse that such a complex and controversial issue needed enough time to study pros and cons. He kept up his smile although it was the most tasteless dinner he had ever been to. He took leave sounding sweet and unruffled but his mind was hissing like a snake. After the event his behaviour towards Mittals suddenly changed. Instead of positive response he became an intagonist and a Mittal baiter. It was intolerable for a person upholstered in white skin to see a brownie propose for a merger of the mighty Arcelor Group of Europe with his monkey business. Overtaken by anger he began to rally European groups against Laxmi Mittal.
In an interview he could not hide his racialist feelings when he blurted—It was beyond my scope of thinking that an Indian could dare to propose acquistion of Arcelor Group. In his outburst he could not even see that he was echoing racialism of worst kind that might land him in soup. About Mittal’s sucess he remarked that “Mittal had made money by cheating others, fooling and using deceitful means.” It was more than enough to break the friendship of the two. Guy Dolle looked more an enemy then a business competitor.
The episode when blew up into open shocked the steel business world. But Laxmi Mittal did not lose his cool and remained firm on his intention. He was keeping a close watch on the situation. Laxmi had not anticipated such violent reaction from Dolle and his vitriolic diatribe. Guy Dolle looked smitten and was using undignified language.
Laxmi Mittal’s opening Bid
Laxmi Mittal was hearing about the statments of Dolle and European factionalism. He did not react immediately. He was following the wait and watch policy as he knew that the war of words would gain him nothing. Laxmi would not retaliate or accuse him of racialism. Instead he reviewed his entire strategy. He had made up his mind to react in a corporate culture way. He was not underestimating Arcelor Group. Two weeks after that dinner he assessed the price of Arcelor at $ 22.7 billion. In the corporate world no industrial group had been offered such a high bid. With his bid Laxmi Mittal revealed the positives of the merger move. The Europeans took an affront that an Indian was bidding to take over white man’s legacy. But the ball was in the court of Arcelor.
Arcelor’s reaction
Price pegging of Arcelor by Laxmi Mittal triggered off debate amongst the economic commentators about how justified the assessment was. The message also got across the Mittal was very serious about his proposal. But being an Indian was proving a disqualifying mark in the estimation of the racial Europeans. Arcelor was feeling insulted. Guy Dolle began to harp that Laxmi Mittal was trying to prove himself to be the king of the steel world by imagining a deal that did not exist. He was bidding merely to humiliate Arcelor. He said sarcastically that Arcelor was no sick or loss making group for Mittal to wear in his cap like a feather. This is not happeing he said.
Dignity of Mittal
Laxmi Niwas took the remarks and barbs of Guy Dolle and other Arcelor executives in a very natural way. He understood every running business would avoid its merger with other. Every person would wish to protect the independent existence of its groups. Laxmi Niwas only issued a dignified statement—‘I am an Indian by birth and I am proud for that fact. But now I am a British citizen and my children are born and brought up in Britain. My working headquarter is in Rotterdam. For that reason the question must be about capability and not nationality. My steel business is in 14 countries and India is not amongst them. My steel products are exported to most of the countries of the world. In this age of globalisation the world has become a global market where the narrow minded parochialism does not fit. As an industrialist I wish to take the global steel industry to a new height. My proposal was about merger and not acquisition. If the two biggest industrial groups of the world go for a mega-merger then there is no question of any group becoming senior or junior’.
He made it clear the technology had made the world a small place and distances had disappeared. In such a world a man’s achievement only should be his identity. From global business the narrow mindedness of nationality, colour, faith or caste should be banished. Brotherhood should be the only order. He assured that merger would result in reduction of production cost of end product. So, according to Mittal the merger of Mittal and Arcelor was the need of the 21st century and it would benefit the shareholders of both the groups. He said there was no intention of slighting anyone on his part.
Arcelor group’s snarl
The civility of Laxmi Niwas was taken in a wrong spirit. Arcelor people thought that their hostile reactions had frightened Mittal into soft speak. The humility and superiority of an Indian was in no way acceptable to the European Arcelor. The Europeans were miffed up that an Indian had dared to put a price tag on them. Europeans could only see any Indian as the one who was till yesterday their slave. Out of arrogance of being white Europeans they failed to see the noble purpose behind the humble proposal of Mittal.
Arcelor group had clearly taken Mittal Group to be their enemy, a stalking jackal. Through a vicious game plan Europeans were incited to react against Mittal Group. To deal with the difficult situation Mittal engaged his expert team to clarify their groups position and intentions to the people and the critics. The advantage of merger were presented to the industrial experts, commentators and observers.
To expose the parochialism and misconceptions of Arcelor Group Laxmi Mittal and Aditya Mittal visited several countries and in a very dignified way but firmly put their case before Arcelor investors, shareholders, industrial analysts and media. They also met representatives of the governments and the diplomats. It was stressed that the main aim behind the merger proposal was to strengthen the global steel industry and create long term advantages and benefits. There was no question of any respect or disrespect.
Attitude of Indian Government
Although Mittal Steel had no stake in India and it was their business matter, yet the Indian government took it very seriously because the issue had gained ugly racial overtones. The people of India still remembered how Gandhiji was humiliated in S. Africa on racial grounds. They could smell the same ugly racialism at work on industrial platform against another Indian. Then, Indian government had espoused the causes of blacks in South Africa for a long time since independence when Nelson Mandela was suffering the apartheid policy of whites. Sentimentally strong Indian government jumped into the fray in support of Laxmi Mittal. The political clout of the economically rising Indian backing was a shot in the arm of L.N. Mittal. The luck was also favouring Mittal.

Around that time the French President Jack Chirac was scheduled to visit India. L.N. Mittal was in India conveniently or strategically. He had already met the Indian premier Dr. Manmhon Singh. The prime minister expressed Indian concerns to the French president protested against the criticism and opposition faced by an industrialist for being an Indian in the so called age of globalisation. The president Chirac reacted in a balanced manner. He revealed that French government had no equity holding in the Arcelor group. It was an independent cocern. He informed that Arcelor had given employment to 35,000-40,000 French people and France cared for the shareholders as well. He gave no assurance in clear words. But the French finance minister, Burten said in a statement—“Laxmi Mittal is a problem in global business grammar.”
Obviously he was prejudiced and was against Mittal’s acquisition policy. Mittal Arcelor tussle was becoming a political problem and India was now fully behind Mittal. Indian commerce minister Kamalnath openly backed Mittal and visited several countries soliciting support for Mittal Group. He said India was proud of the achievements of one of its industrialists at the global stage. He also made it clear that Mittal’s intention in the merger was only to create better future for the steel industry. He gave the example of the cement industry where India had welcomed the entry of Leffarage, the French building construction material manufacturer. French government had also rules and laws against discrimatory acts in business and industry, Kamalnath reminded.

India and France had cordial political and business relationships. They were partners in defence dealings. Kamalnath met European trade commissioner Peter Mundelson in this matter. Kamalnath was assured that in Mittal Arcelor matter no parochialism, nationality and racialism will be allowed to play role. India had made a strong pitch. It created pressure on Arcelor and its spokesmen now avoided making racial comments.
Arcelor’s new move
The developments told Arcelor people that the negative approach to the issue was proving counter productive and it would hurt them in the end. They had to do something remaining within the limits of the global corporate rules and codes of conduct, otherwise they may attract prohibitory laws. In the 21st centruy the businessmen are required to act with dignity. The people were gradually appreciating the dignified behaviour of Laxmi Niwas Mittal. Arcelor was even losing the support of the neutral sections.
Arcelor changed its tactics. It began to take its shareholders into confidence. It announced an increase in the dividend sums of shares and began to take direct and indirect steps to safeguard the interests of the shareholders. Arcelor accused Laxmi Mittal of under rating the value of its shares which shall hit the investros. Guy Dolle propagated that if Arcelor and Mittal groups merged the interests of the shareholders would be in danger.
In retaliation Mittal Group made an announcement that the offer would be appreciated. The merger would lead to the upgradation of technology for high quality products which should raise the share values to the benefit of the holders.
The negative attitude of Arcelor was making Laxmi Mittal impatient and a bit frustrated but he had not lost hope. The animous behaviour of Guy Dolle was proving a hurdle in the way of the ambitious drive of Mittal Group. Laxmi Mittal decided to add impetus to his campaign. Besides campaign specialists, the investors, bankers and financial experts were also employed to create favourable situation and opinion for Mittal Group. Laxmi Mittal backed the teams to the hilt financially. Millions of dollars were spent. The situation appeared to be building up for talks between the two groups. Arcelor made no move. Some French and Spanish diplomats advised Mittal to reconsider the assessment of the worth of Arcelor he had made.
Laxmi Mittal felt the only way to push the matter forward was increasing the offer amount. He sent to Arcelor a revised proposal making three points clear :
❑ For Arcelor 12 shares the shareholders will get 13 Mittal Groups shares.
❑ For 12 convertible Arcelor bonds the holder shall get 13 Mittal Group shares or Euros 188.42.
❑ The new proposal offered $33 billion instead of the earlier offer of 22.7 million for acquisition.
In that crucial period Laxmi Mittal had acted quite intelligently. The revised proposal could not be easily trashed. Arcelor must look for some plausible ground to reject new offer. The ball was again in Arcelor court. But the new offer too failed to impress self conceited and arrogance blown mind of Guy Dolle. Arcelor board did not accept the offer.
Suicidal step of Arcelor
But destiny was working to put things in Laxmi Mittal’s way. It would make Arcelor do something very stupid and work its own fall. When Mittal Group withdrew from its ambitious bid a decision taken by Arcelor board made the people rethink.
In May Arcelor board announced the acquisition of Severstal, the Russian enterprise. 32% equity of Severstal was bought for 1.59 billion as per the proposal. Alex Mordoshov was the president of the Russian Company. He enjoyed good relationship with President Vladimir Putin. Even after merger the Arcelor had bestowed on him 25.01% voting rights. This right was to stay as long as the group remained listed with Moscow stock exchange. Even the management of Severstal was not trustworthy.
The industrial observers were at a loss to understand why Arcelor had done that worthless deal. It was a losing propositon for Arcelor. To make things even worse was 20.21%voting right gifted to Mordoshov. The suspicion arose that Arcelor was doing that senseless deal to kill the efforts and dream of Laxmi Mittal for good. The entire board of Arcelor came under question that had rejected generous offer of Mittal Group but went for a merger with an inferior outfit that had a suspect management. Shareholders of Arcelor began to raise voices of protest. The deal did not appear worthy of a top group like Arcelor.
Steel Mackrel of London commented—’If the tie up becoms a reality its fate will be written in the hell’. Steel was the director of ‘Iron and Steel Statistics Bureau’—and his words carried great weight. That spread panic amongst Arcelor shareholders.
Mittal charge on Arcelor-severstal
Laxmi Mittal is a cunning fox of steel industry. He was analysing every move of Arcelor. His experts had made deep inroads into groups of Arcelor shareholders. The tie up provided a wonderful opportunity for Mittal to save his ambitious plan from getting crushed under ‘Arcelor-Severstal’ deal. Working on a new game plan Mittal Group made contacts with main and block shareholders of Arcelor group. They were met personally and explained the benefits of ‘Arcelor-Mittal’ merger against the disadvantages of ‘Arcelor-Severstal’ tie up. Eristrein who had 3.6% equity of Arcelor supported Mittal offer. He raised the issue with Joseph Kinsch, the chairman of the Arcelor Group. He spoke against the arrogance of Guy Dolle and demanded his removal. The human resources experts of Mittal met the workers of Arcelor and assured them there would be no retrenchment after merger and were informed of worker welfare policies of Mittal Group that would gain them greater benefits.
Meanwhile European Union and Russia were in bitter relationship phase. Laxmi Mittal got his experts working from this angle too and it was propagated that Russia was milking European Union of 300 billion dollars a year through its oil and gas and stealing away industries like steel and telecommunications to weaken the European industries. Mittal knew it would surely unite European groups against ‘Arcelor-Severstal’ tie up. Their sentiments were being worked up.

In June Arcelor Group issued notice for meeting to gain deal approval voting. Big equity holders revolted and openly opposed the tie up deal. The board of Arcelor had not anticipated it. It was all due to secret work done by Mittal Group. The revolt made chairman Jojeph Kinsch take over the responsibility of negotiations in place of Guy Dolle. He reviewed the Arcelor-Severstal deal and showed positive mood to Laxmi Mittal. The tide had turned and the things were moving favourably for Mittal Group. Joseph Kinsch accepted to talk business with Laxmi Mittal.
Positive attitude—positive result
Kinsch and Mittal sat on a table on June 18, 2006 for business and lunch in a room with doors closed. Laxmi Mittal was assisted by Aditya and some experts of his group. Joseph Kinsch had the services of his chosen associates. Kinsch focused on the matters related to management and Laxmi Mittal kept replying to his queries using his vast experience and the achievements. The talks were going on in cordial atmosphere. In the beginning they talked like opponents which gradually shifted to neutral and then friendly gears. The meeting ended with a decision to meet again. They met again on June 23. This time the talks were held with hearts open and all the issues were discussed and concluded in mutually acceptable agreements. The media waited outside with baited breath to tell about the biggest conquest of Laxmi Mittal.

But it was all provisional. The declaration is only made after the deal is formally signed. And before that anything can go wrong anytime. Something like that happened in this case as well. Suddenly Arcelor board put forward a condition before L.N. Mittal. Mittal rejected the condition as it did not go well with his self respect. He would not compromise on that. He suggested a modified condition that would satisfy his conscience. But Arcelor board rejected that modification. Laxmi Mittal walked out of the meeting.
Better sense prevails
Very soon Arcelor board realised that Laxmi Niwas was more on the correct side. The modified condition was accepted by the board. The glitch had passed over. Arrogant Europeans knew that the merger was in their own benefit and there was only a point upto which L.N. Mittal would allow them to push. The shareholders had become Mittal supporters. ‘Arcelor-Severstal’ tie-up proposal was thrown in waste paper basket and Arcelor-Mittal merger proposal was approved. The road was now clear for formal declaration of the historic merger. The strong headed L.N. Mittal had finally been crowned as the King of the steel industry and Aditya Mittal a natural Crown Prince.
Salient points of the campaign
Although the victory had come but after a bitter fight and difficult passage. The end result was according to the vision of Laxmi Niwas and Aditya Mittal. The in-between developments were just like twists and turns of a thriller. These developments need to be reviewed again to underline what facts and factors they threw up and how the two sides fared in the merger :
❑ Arcelor CEO Guy Dolle being invited to dinner and confided with the merger idea was not a correct decision from the diplomatic angle. Mittal duo of father and son had misjudged the character of the Frenchman Guy Dolle who was a socialist deep down.
❑ Mittals had met him at lunches and business parties where people wear masks to appear being civilised. From behind those charming masks appear racialists like him, serial killers, rapists, murderers, frauds and rapists. Mittals should have got investigated his private life through a discrete agency.
❑ The shareholders of Arcelor should have been contacted in the first place and taken into confidence by Mittal.

❑ The racial comments on L.N. Mittal made by Guy Dolle was a sad development for the corporate world that was supposed to function in global brotherhood spirit.
❑ The issue proved that European community in pockets still suffered from racialism and the idea of white superiority was still alive.
❑ There was needless tension in the relationship of Indian and French governments. A business dispute reached the corridors of power.
❑ The government of India stood by Mittal and played a very meaningful role.
❑ At the very onset the price tagging of Arcelor by Mittal at 22.7 billion was not a correct step. Later it cost him more than $ 10.3 billion.
❑ Arcelor Severstal deal was a decision taken in haste with some ulterior motive. It suffered from lack of sound business sense.
❑ This merger campaign cost L.N. Mittal indirectly about Rs. 3,000 crores.
❑ The active arrival of Joseph Kinsch on the negotiation scene changed the course of the deal.
❑ The campaign carried on more tactfully could not have cost L.N. Mittal so much. But that is all in the hindsight.
❑ L.N. Mittal forgot that the business needs to be based on friendship. He tried to buy enmity first.
❑ An anti-Severstal atmosphere made the Arcelor-Mittal merger possible.
Losers and gainers
All the business process and developments lead to an end that reveals who lost and who gained. Arcelor and Mittal Group merged but the question remains which side gained what and while one lost what? The comentators and analysts judged it in the following way :
❑ After the merger the name of the group became Arcelor Mittal. It could have logically been Mittal Arcelor but the Europeans wanted to prove their superiority at least symbolically and they succeed on the plea of alphabetical order.
❑ Even on the management issue Mittal was pushed on the backfoot. The seven member executive committee was to have four from Arcelor side and three from Mittal Group.
❑ The right of appointing CEO was kept by Arcelor reserved for itself. But Arcelor agreed not to appoint Guy Dolle on that post.
❑ After merger the group decided to have 18 persons in the board of its directors. Arcelor retained its 12 serving directors and left only six for Mittal group to fill in. Thus the ratio worked out 2:1 in favour of Arcelor.
❑ Laxmi Mittal was accepted as the president of the group but in non-executive capacity. Joseph Kinsch continued to be the chairman and then a reso-lution was passed to give Mittal the executive powers.
❑ After the end of the term of L.N. Mittal’s executive presidency the right of the next appointment rested with Arcelor itself.
❑ Aditya Mittal was only given a post in the board Directors which fell short of his expectations.

❑ According to the merger deal specifications Mittal Group had to surrender future business planning to the Arcelor group. But it indirectly proved the trustworthiness of L.N. Mittal and the shareholders believed in his honesty. Such business plans shouln’t have been revealed.
❑ In the matter of share holding Laxmi Mital was kept under the ceiling of 45% limit.
❑ In the Mittal group a member of Mittal family had two votes but after this merger one memeber one vote rule became applicable.
❑ At first sight it appears that L.N. Mittal had made several compromises and his position had weakened. But the long term gains were immense. His main aim was of bring two giant groups together for better future. It goes without saying that as the time goes by Mittals will become more and more powerful with their drive and business creativity. No one can stop the merit gaining upper hand.
❑ After the merger Arcelor-Mittal shall meet 50% of the total global demand in very near future.

❑ The group shall be producing 200 million tonnes of steel annually. It will have a big say in international steel policy.
❑ The group will become operative in new areas or countries. The future will be decided by the situation of the groups at present. Take a look at the world’s top ten steel producing groups tabled below :
Company Production (in million tonnes)
  1. Arcelor-Mittal 115
  2. Nippon 33
  3. Pasco 31
  4. J.F.E. 30
  5. Bao Steel 24
  6. U.S. Steel 20
  7. Newcor 18
  8. Reeva 18
  9. Thycene Krupp 17
10. Tung Shaun 16
❑ The above listed are the ten top global steel makers, yet they only meet 25% of the total demand. The rest of the demand is about 70% is met by small produces of unorganised sector.
❑ Arcelor-Mittal are at present producing 115 million tonnes of steel. It remains to seen how soon it will reach the target production of 200 million tonnes and that will decide how successful the merger has proved.
❑ Arcelor-Mittal must take away some business from unorgainsed sector. The poaching is unavoidable.