Steel Industry : Mittal Steel owns nearly 92 percent of Arcelor

LONDON (AFP) - Mittal Steel, the world's biggest steel producer has announced that it controls 91.88 percent of European steel maker Arcelor following its 25-billion-euro takeover bid.

"I am delighted at this result which is a resounding endorsement of the strategic logic and value of the merger of Mittal Steel and Arcelor, a truly industry transforming deal," Mittal chairman Lakshmi Mittal said in a statement received by media in London on Wednesday.

He added: "We are very excited about our future as one company and believe this strong vote of confidence from shareholders paves the way for a speedy integration process, allowing us to realise the full benefits of working together as the undisputed world steel leader."

Mittal Steel updated the market after announcing on July 18 that it had acquired at least 50 percent of the shares in the world's number two steelmaker Arcelor, the minimum required for its takeover bid to succeed.

The share and cash bid values Arcelor at about 25.4 billion euros (32.4 billion dollars) and would create by far the biggest steel group in the world.

Mittal officially launched its hostile offer for Arcelor in May after almost five months of intense and sometimes bitter manoeuvering, but the Arcelor board finally recommended an improved bid a month later.

Mittal said on Wednesday that 594.5 million Arcelor shares and 19.9 million Arcelor convertible bonds had so far been tendered, representing 91.88 percent of the group's fully-diluted share capital.

As part of the takeover terms, Mittal has issued 665.6 million shares and paid 7.77 billion euros in cash to be paid to the holders of the tendered Arcelor stock.

An additional offer period for shareholders yet to tender their Arcelor shares will close on August 17, Mittal Steel said.

Mittal's takeover would meanwhile create a group with 320,000 employees that produces about 116 million tonnes of steel per year, about 10 percent of the world market and three times more than Nippon Steel.

Arcelor was formed of formerly state-owned interests in France, Luxembourg, Belgium and Spain.

Mittal Steel is a quoted, privately owned company registered in the Netherlands but run from London by the Mittal family which is of Indian origin.

Under the terms agreed by Arcelor and Mittal Steel, Arcelor shareholders are to hold 50.6 percent of the combined group, with the rest owned by Mittal investors, including the family's share of 43 percent.

The two sides have still not resolved the status of Arcelor's Canadian unit Dofasco, which Mittal had promised to sell to the German group Thyssenkrupp once the takeover of Arcelor went through.

What are your thoughts on this? It seems to me that:

1. It is good that hostile takeovers can occur in Europe.
2. It probably means a lot of job cuts in Europe which they can ill afford.

Mittal has been expanding his steel processing empire by leaps and bounds. He kind of reminds me of J.P. Morgan's consolidation of American steel companies into United States Steel.

I wonder about the following:

1.How much debt does Mittal now carry?

2. How efficient has his management become in running these different enterprises in different countries (he has United States Steel and Krivoyrihstahl also).

3. How much of his stock is "watered" i.e., overvalued deliberately?

This has the earmarks of an explosion in the financial markets.

Yes, I think it's good that takeovers, even hostiles, can occur in Europe and I really think that the "economical patriotism" developped by the actual french government is ridiculous and counter-productive. Especially when you consider the huge amount of french investments abroad during the last ten years...
I'm not quiet sure that this merger means that a lot of jobs will be cut in Europe because Mittal Steel and Arcelor don't produce the same kind of steel. It seems that there's a certain complementarity between the two groups. But only time will tell...

According to S&P, it will have about EUR31 billion after the merger and they downgraded them to BBB as a result.

Steel is booming at the moment, but when recession sets in we'll see. Mittal does have an advantage in that it produces in a lot of emerging markets as well which should offset the slower growing European and North American markets.

I don't know if it is overvalued or not. The price of the acquiring company ususally goes down in a share offer merger like this.

I am reminded of the wise words of Warren Buffett:

"The sad fact is that most major acquisitions display an egregious imbalance: they are a bonanza for the shareholders of the acuiree; they increase the income and status of the acquirer's management; and they are a honey pot for the investment bankers and other professionals on both sides. But alas, they usually reduce the wealth oft he acquirer's shareholders, often to a substantial degree."

I guess we'll see.

Yes, it is funny how yogurt (Danone) can be a strategic industry but a major takeover of a steel manufacturer (the largest in Europe) was allowed to take place.

I think if there are not cost savings in this merger, Mittal will have problems because he paid a high price.

I see your point. But as an example, Krivoyrihstahl was the largest in size and tonnage produced steel mill in the Soviet Union. It is also sited quite near the largest open pit iron mione in Europe.

However, Krivoyrihstahl is a basic steel produce and I am not sure that they are using newer technology e.g., basic oxygen furnaces etc. If labor rates move up they could have a problem competing.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.