LAKSHMI MITTAL AND THE GROWTH OF MITTAL STEEL (Study case, chapter 7) Andréanne Delisle Simone Frscoli Marco Luraghi

FORCES THAT DROVE MITTAL EXPANDING 1970 Limited growth opportunities in India due to: Regulations constraints Competition from 2 big rivals 1975 Steel making plant set in Indonesia 1989 1° acquisition (“Iron & Steel” of Trinidad & Tobago) After 1989 Global steel industry was in a slump. Lakshmi predicted that the industry would have turned a corner. It was TRUE.

WHY M&A INSTEAD OF GREENFIELD INVESTMENT M&A are quicker to execute. Acquiring a foreign firm means also acquiring valuable strategic assets (i.e. equipment, customers and distribution systems). Less risky to buy something exsisting than building it from the ground. Mittal believed it could increase the efficiency of the acquired unit by transferring capital, technology and management skills.

Global growth Geographic presence: 27 countries, across 4 continents with operations among more than 60 nations. Also in developed countries. Brazil’s central role in South America. Future plans: Building a stronger presence in Asia and increasing the global market shares (20% today).

Mittal’s advantages “Not a single country that we operate in accounts for more than 8 per cent of our total sales…we are not dependent on one or two people.” Says Mittal. Increasing revenues and market shares. Less concentrated risks. Having economies of scale. Cross-selling operations. More confidence, know-how and synergies. Reduction of tax liabilities.

Countries’ benefits VS. drawbacks Lower prices. Improving the domestic economy. More trade operations. “Minute factory” model for emerging nations. VS. No spaces for rivals. Excess of demand. Higher public expenditure.

Acquisition of Arcelor Hostile takeover bid Mittal offered $32 Billion The acquisition was contested Management of Arcelor Politicians The deal was approved in late 2006 ArcelorMittal is now the world’s largest steel company.

Why did the politicians object? Public opinion Social context (Arcelor employees) Governments were shareholders Pressures from Arcelor Management Are these objections reasonable?

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