1. Acquisition of ARCELOR Steel by MITTAL Steel NMIMS, PTMBA 3 rd year Marketing DIV -A

2. Contents NMIMS, PTMBA 3 rd year Marketing DIV -A

3. Corporate Strategy, Corporate Finance & Management Buying, Selling & Combining of different Companies Aid, Finance or Help a growing Company in a given Industry

4.  An Acquisition is buying of one company (target) by another  An Acquisition may be friendly or hostile  An Acquisition can be a ‘Reverse Takeover’  Acquisitions can be done in two ways – the buyer buys the shares of the target company the buyer buys the assets of the target company  There are pros and cons involved in every take over

5.  Mittal Steel Company N.V. was formed by the merger of LNM holdings & ISPAT International International Steel Group Inc.  CEO Lakshmi Mittal’s family owned 88% of the company and its headquarter was in Rotterdam, Netherlands  The company was the world’s largest steel producer by volume and also the largest in turnover and is now a part of ArcelorMittal  It was the major player in Steel, Flat Steel products, Coated Steel, Tubes and PipesSteel

6.  Arcelor was created in Feb 2002 through the merger of Arbed (Luxembourg), Aceralia (Spain), Usinor (France)  The merger was officially launched on 19 February 2001  The choice of the Arcelor name was announced on 12 December 2001  Guy Dolle was the CEO of Arcelor and its headquarter was in Luxembourg city.  World’s Second largest steel maker and first in terms of revenues.  Arcelor generated revenues of 40.6 billion euros and produced 53.5 million tonnes of crude steel  Products: Flat Carbon Steel; Long Carbon Steel; Stainless Steel; and Steel Solutions and Services  It was a major player in all its main markets: automotive, construction, metal processing, etcautomotive constructionmetal processing Guy Dolle

8.  In January 2006, Mittal steel launched a 22.7 billion offer to Arcelor share holders  The deal was spilt between Mittal 75 % share and cash 25 % Under the deal :  4 Mittal steel shares and cash €35.25 for every 5 shares of Arcelor.  The offer values shares of Arcelor at €28.21 each, which means that it involves a premium of 27% over the closing price on the stock market the day before

9. TOP PRODUCERS OF STEEL (VOLUME) AROUND THE GLOBE in 2005

10.  Mittal wants to grow, to strengthen itself and to eliminate competitors in a mature sector where costs are a fundamental factor.  Mittal’s interest in Arcelor is based on the type of production each company is involved in Mittal type production & target :  Produces low-cost steel  It has factories in countries where labor costs are low, and its mills are located near mines and close to markets where there is a lot of demand.  In contrast, Arcelor produces steel for industries that demand higher quality products, such as the auto sector.”  Thus Mittal’s offer was an attempt to enter the higher range of the steel industry as well as new markets where the company does not have any production facilities

11.  Arcelor Management – The management was extremely hostile to Mittal Steel’s bid It believed to have been doing the acquisitions and not the other way around The CEO of Arcelor dismissed Mittal Steel as a “company of Indians”  European governments – The French Government and the government of Luxembourg was against the deal The European Union approved of the deal

12.  Arcelor Management: Arcelor’s senior executives saw the offer as hostile board of directors called an urgent meeting where it unanimously rejected the Mittal offer  Arcelor’s board arguments to justify a rejection is that Arcelor and Mittal do not share the same strategic vision, the same model for development or the same values.  Guy Dollé President of Arcelor, told a press conference “Arcelor is not going to share its future with Mittal,”.

13.  Declaration of dividend – On February 16, Arcelor declared a dividend of 1.2 euros to convince the shareholders of a positive situation under current management  The Russian Angle – To thwart the offer from Mittal Steel, Arcelor released a 13 billion Euro merger plan with Severstal, a Russian company

14.  Analysts believe that Guy Dolle had issues with the personality and management of LN Mittal  Guy Dolle raised several issues about the safety record of Mittal  Guy Dolle is not a part of the new Arcelor-Mittal organization

15.  Most Indians believed that the deal was not getting pushed because of Lakshmi Mittal’s nationality  The Indian government raised the issue through commerce minister Kamal Nath  LN Mittal himself felt that there was no case of “racism” here as Mittal Steel was a European company and NOT an Indian one

16.  Increased valuation to 40.40 euros  Gathered the support of shareholders  Wooed the European governments namely Luxembourg, France and Spain  Obtained the support of trade union

17.  Contrasting culture of two companies  The Steel Price may slow down  Extent of synergies realized through the Merger

18.  On 25 th June, 2006 the deal finally clinched when the shareholders of Arcelor agreed to Mittal Steel’s offer  Mittal had to considerably sweeten the initial offer-by raising its valuation of Arcelor to $32.9 billion  The Mittal family holds 43 percent of the combined group  The combined company holds 10 percent of the global market for steel

19. New company to be called Arcelor-Mittal, and not Mittal-Arcelor Majority of board members will be from Arcelor despite Mittal·s high stake The company will be headquartered in Luxembourg LN Mittal will be co-chairman along with Arcelor chairman Joseph Kinsch

25.  Arcelor Mittal is now the largest steel company in the world  ArcelorMittal is the leader in major global markets, including automotive, construction, household appliances & packaging  The company is headquartered in southern Luxembourg City, the former seat of Arcelor  Lakshmi Mittal (owner of Mittal Steel), a non-resident Indian is the Chairman and CEO Headquarters at Luxembourg city

26.  It employs 310,000 employees in more than 60 countries  Organic growth of 20 million tonnes  ArcelorMittal key financials for 2007 show revenues of US$ 105.2 billion  A crude steel production of 116 million tones, representing around 10% of world steel output  Unique R&D capability in the steel industry  As of May 17 2008, the market capitalization of ArcelorMittal was $144.37 billion

28. The deal has been in favor of both the companies. This can be suggested by the following PROS of the deal –  Increase in revenue of the company from $28.123 billion to $105.2 billion and operating income from $4.746 billion to $14.83 billion  Venture into new businesses and market like Luxembourg, Senegal, Liberia and looking to develop positions in the high-growth Chinese and Indian markets  Profit of the company has risen from $3.36 billion to $10.36 billion  Decreased competition and increased market share  Enlarged brand portfolio  Increase in economies of scale and share value.

29. The CONS of the deal include –  High monetary cost of the target company (Arcelor) which is $32.9 billion As the pros of the deal completely outweigh the cons involved, it can be said that the deal has been a successful one for both the companies, its people and the world.

30.  Synergy  Brought iron ore,technology and marketing expertise together  Adept at combining businesses  Smoothen out the price fluctuations  Created a much stronger and more sustainable business  Clear strategy to deliver further growth and value creation

31. Now the Mittal family owns 88% of the world’s largest steel company. Its most recent purchase, last year, was International Steel, the U.S. company, at a cost of $4.5 billion. Mittal Steel is now using the same strategy to challenge the sector by presenting an offer for its closest rival. Mittal may already be the leader in the United States and Asia, but it could soon reach the top spot in the European rankings.

32. MALAY MUKHERJEE Member of the Group Management Board ADITYA MITTAL CFO Member of the Group Management Board MICHEL WURTH Member of the Group Management Board GONZALO URQUIJO Member of the Group Management Board JOSEPH KINSCH Member of the Group Management Board

33. Mergers and Acquisitions continue to be amongst the preferred competitive options available to the companies seeking to grow and prosper in the rapidly changing global business scenario.