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Wed, Jan 29, 2020, 9:32:51 ---- The fact: 42.844.000 visitors done.

Mittal makes "daring" unsolicited bid for Arcelor
Steel Business Briefing
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Company: Steel Business Briefing, , United States
Attn: Andrew Goodwin

Mittal Steel has launched a 18.6bn unsolicited takeover bid for Arcelor, claiming that the move would create a win-win situation for the world's two largest steel companies. If successful, the new company would have a crude steel production of around 115m t/y some 10% of the global market by volume.

Aditya Mittal, the companys chief financial officer speaking at a press conference in London - called the bid "daring." Lakshmi Mittal, the chairman and chief executive officer, said a new enlarged Mittal would change the landscape, and take the industry in terms of consolidation - to "the next level." It would also reduce price volatility, he claimed.

Both father and son focused on the industrial and commercial logic of a tie-up led by Mittal; they identified over $1bn in potential synergies. Some $600m of these would be in purchasing. However, they were reluctant to comment on a suggestion that Arcelor might make a reverse takeover bid for Mittal Steel.

Geographically and in product terms the two companies are complementary, says Mittal. It adds that a merged company would have an "unequalled geographic footprint." It would control 61 plants in 27 countries and hold leading positions in most of the worlds major markets.

The main exceptMittal offer puts premium on Arcelor shares

Mittal said it first approached Arcelor on 13 January with its proposal, but that the response from the companys chief executive, Guy Doll at a meeting believed to be in London, was non-committal. Mittal says it tried on two subsequent occasions to discuss the issue with the company, but failed.

As the bid is currently structured, the free float would consist of 43% of the new companys stock, with Mittal holding 57%. The new group would have revenues of around $70bn, and captive iron ore supplies of around 40-44% of its needs. In coke it would be self-sufficient.

The unsolicited bid values each Arcelor share at 28.21, a premium of 27% over the closing price of Arcelor shares on Euronext Paris on 26 January. Lakshmi Mitttal has not ruled out increasing his offer.

The offer from Mittal is for a mixture of cash and stock. Individual shareholders would have the right to "any proportion they elect," provided that 25% of the aggregate consideration paid to Arcelor shareholders is in cash and 75% in stock. Hence the maximum cash outlay by Mittal in this bid would be $4.7bn.

Steel Business Briefings calculations suggest that this offer values Arcelors crude steel capacity at around $400/per tonne. This compares with over $1,000/t in Arcelors final bid for Dofasco, and around $700/t for Mittals winning bid for Krivorizhstal. Aditya Mittal said it was not possible to compare cash offers with stock offers; however others suggest that the differential in this case - should be much smaller.

Meanwhile, Lakshmi Mittal says that his company would honour all Arcelors commitments in terms of investment, and employment, and is looking for "friendly" discussions with the Arcelor management. There will be "plenty of space" for joint management in the combined entity. Mittal would give consideration to siting the headquarters of the new company in Luxembourg.

Arcelor terms Mittal bid 'hostile', prepares response soon

Arcelors initial response termed Mittal Steels takeover bid "hostile". In a statement sent to Steel Business Briefing the company also underlined the "absence of discussion and consultation in advance". It said the Arcelor board will meet "soon" to give its response this is understood to be 30 January at the latest.

One industry analyst tells SBB that Mittals unsolicited and unfriendly bid has raised hackles both within Arcelor and among some of its influential shareholders.

The Luxembourg government owns nearly 6% of Arcelor, and Prince Guillaume of the grand-duchys ruling family sits on its board of directors. A further 3.2% is owned by the government of Belgiums Wallonia region, and Arcelor employees hold another 1.9%. So more than 11% of the companys shares are in the hands of bodies who are unlikely to favour a Mittal takeover.

Whether this is enough to block the bid remains to be seen. Other shareholders may await further developments: a French investment group which owns Arcelor shares was quoted as saying Mittals offer of 28.21 per share is too low, and it would not sell for less than 32, and preferably 35.

The French finance minister Thierry Breton said his government has "concerns" about the hostile nature of the takeover bid and the lack of prior discussions between the companies. He is seeking a meeting with Lakshmi Mittal.

A steel analyst says the takeover is a real "culture clash" Mittal Steel is a "freebooting outfit" driven by one mans entrepreneurial ambition. In contrast, Arcelor is a more traditional corporation which retains traces of its past when many of its constituent parts were state-owned.ion is East Asia. However, China is looking to consolidate its own industry in the coming years, Lakshmi Mittal tells Steel Business Briefing; and this should help reduce price volatility there, he suggests.

Others note that recent consolidations in Europe and North America have already reduced volatility in these two regions, leaving Asia as the main source of global volatility. They also claim that the process of consolidation in China is far from certain. Lakshmi Mittal noted that a company with the combined strength of Mittal and Arcelor could help "shift the Chinese governments position," on further foreign investments.

Meanwhile, Mittal has signed an agreement, that if its bid is successful, it would sell Dofasco to ThyssenKrupp at a price equivalent to C$68/share.

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