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Case Title:

The Mittal Arcelor Bid

Publication Year : 2006

Authors: Gayathri & Doris John

Industry: Minerals, Metals and Mining

Region:US,UK

Case Code: GBE0053C

Teaching Note: Available

Structured Assignment: Available

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Abstract:

On January 27th, 2006, Lakshmi Nivas Mittal (Mittal), the founder and Chairman of Mittal Steel, the world's largest steel company launched an € 18.6 billion ($22.7 billion) hostile bid for Arcelor, the second-largest steel company in the world. Mittal, the man behind the company specialized in acquiring sick steel units and turning them around. According to Mittal, the bid was only an extension of his growth strategy. However, Mittal’s bid for Arcelor created political turmoil and opposition. Arcelor was one of the few pan-European companies and considered by the European Governments as a ‘corporate jewel of Europe’. While Mittal substantiated the bid saying that the combined entity would largely benefit the steel industry, Arcelor Chief, Guy Dolle rejected the bid pointing to the incompatibility of the two entities and the lack of an industrial basis to the takeover plan. According to Mittal, the takeover would create an entity which would have a better bargaining power with suppliers and also entail synergies in marketing and manufacturing efficiencies. He also argued that the tie-up would help the steel industry overcome problems of overcapacity, innate to the industry. The European Governments expressed concern about job losses and corporate governance issues.

In an effort to defend Arcelor, a number of steps were taken. The Luxembourg Government, which was the single largest shareholder, passed amendments in its takeover laws. Although it denied it was aimed against Mittal, the move was obvious. Arcelor announced an increased dividend to its shareholders. Despite fierce opposition to the bid, Mittal made a formal notification to the Commission, the European Union's highest antitrust authority for scrutiny of the offer. In this context, it was to be seen if Mittal would succeed in the bid and if such intense opposition to the bid was justified.

The case allows for discussion on: Issues involved in cross-border takeovers; Economic and political factors that come into play in a takeover; Synergies that emerge through takeovers and Defensive strategies adopted by the target company. This case would help management students covering courses on Business Environment, Economics and related subjects.

Pedagogical Objectives:

  • To discuss:Issues involved in cross-border takeovers; Economic and political factors that come into play in a takeover; Synergies that emerge through takeovers and Defensive strategies adopted by the target company.

Keywords : Government and Business Environment Case Study,Mittal Steel, Arcelor, Mittal, Bid, Takeover, Steel Industry, Takeover Defenses, Europe Steel Industry, Consolidations, Political Environment, Lobbying, Corporate Governance, Deals, Acquisitions, Business Environment

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