ACQUISITION OF

GAUTAM CHAKRABORTYNDIM, Delhi

A CASE STUDY

ON

BY

CONTENT

1. INTRODUCTION OF A. POWER & POLITICS B. TWO COMPANY C. ACQUISTION 2. THE BID3. CONTROVERSY4. INDIAN GOVERNMENT’S STANCE5. END RESULT 6. CURRENT POSITION7. SUMMARY8. CONCLUSION9. QUESTIONS

INTRODUCTION…. A. POWER & POLITICS

POWER:-

Power is the capacity of a person, team, or organization to influence others.

The potential to influence others

People have power they don’t use and may not know they possess

Power requires one person’s perception of dependence on another person

POLITICS:- Attempts to influence others using

discretionary behaviours to promote personal objectives

Discretionary behaviours — neither explicitly prescribed nor prohibited

INTRODUCTION…..B. THE TWO COMPANY

MITTAL STEEL: Mittal steel is the largest producer of

steel in terms of volume and also largest in turnover.

Despite Mittal steel industry is based in Netherlands, it is perceived that the the company is non- european because its CEO, Lakshmi Mittal, is Indian.

ARCELOR: Was the largest producer of steel in terms

of turnover. Second largest in terms of steel output. Created by the merger of three

companies: Aceralia(Spain), Arbed(Luxembourg), Usinor(France)

INTRODUCTION…..C. ACQUISITION

The acquisition of Arcelor by Mittal steel led to the creation of Arcelor- Mittal , the largest steelmaker in the world. It has been one of the most controversial business deals ever. When the European steel maker bowed by the Mittal steel.

In January 2006 Mittal steel offers to the shareholders of Arcelor to create the worlds first 100million tone plus steel producer.

And launched a 22.7 billion dollars offer to Arcelor shareholders.

In June 2006 Mittal and Arcelor reach an agreement to combine the two companies in a merger of equals.

THE BID

CONTROVERSYThe Arcelor believe that it should acquire other

companies rather than the other way around. The management was extremely hostile to Mittal steel’s bid from the beginning. Arcelor repeatedly played the patriotic card to convience shareholders to reject the bid. The CEO of Arcelor dismissed Mittal steel as a company of Indian and unworthy of taking of a European company.

The France government was against a deal because of worries over the future of 28000 Arcelor employees.

The government of Luxembourg was against a deal as well for a variety a reasons.

However all these attempts went wrong when the European Union approved the Mittal-Arcelor deal.

INDIAN GOVERNMENT’S STANCE

Most Indian’s were of the opinion that the deal was not getting pushed through because of Mittal’s nationality.

The Indian government raised the issue at several forums, especially through Commerce Minister Kamal Nath.

There were allegations that India had threatened not to ratify a taxation accord with Luxembourg due to the latter’s opposition to the deal.

END RESULT

The deal was finally clinched when the share holders of Arcelor agreed to Mittal steel’s offer.

Mittal steel had to raised its valuation of Arcelor to 32.9 combined company holds 10% of the global market for steel.

CURRENT POSITION Mittal- Arcelor the new entity

will be based on Arcelor’s industrial model.

It has been decided that the management board will have seven members, four from Acelor and three nominal from Mittal steel.

L. Mittal is the CEO and Joseph kinsch from Arcelor is the president of the company.

The Mittal family has the 43% stake on the new entity Arcelor- Mittal.

CURRENT STATUS World’s 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

SUMMARY

Initially mittal launched an offer of 22.7 billion dollars to acquire arcelor

Arcelor tried many tactics to reject the offer

Moreover they declared the increase in the dividend by 85%

But finally the merger happened at the valuation of 32.2 billion dollars

conclusion•The business strategy that has made the mittal-arcelor steel the world’s 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 a regional business.•Mittal steel persued its vision of becoming a global giant

QUESTIONS….

1. Why did the French government oppose the acquisition of Arcelor by Mittal steel?

• Worried about the employees of the arcelor

QUESTIONS….

2. How did Arcelor try to block the acquisition by Mittal steel?

•INCREASED THE DIVIDEND BY 85%•DECLARED THE DEAL WITH THE RUSSIAN COMPANY “SEVERSTAL”

QUESTIONS….

3. What influence tactics did Mittal employ to clinched the deal?

• INCREASED THE VALUATION OF ARCELOR TO 25.8 BILLION EUROS(32.9 US BILLION DOLLARS)

QUESTIONS…..

4. Discuss Mittal’s tenacity in the power struggle for the 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