Arcelor Mittal - a Take over Story Essay

3356 Words Oct 31st, 2012 14 Pages
Group 12

A rcelor-Mittal : A takeover story








8 December 2010

Group 12

1. Company Background
Mittal Steel Company was one of the world's largest steel producers by volume, and also one of the largest in turnover. CEO Lakshmi Mittal’s family owned 88% of the company. Mittal
Steel was based in Rotterdam but, managed from London. It was formed when Ispat
International N.V. acquired LNM Holdings N.V. (both were already controlled by Lakshmi Mittal) and merged with International Steel Group Inc. in 2004. On 25 June 2006, Mittal Steel merged with
Arcelor. The merger has been successfully approved by shareholders and directors of
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Oddly enough, the industry is very fragmented: there are a lot of microproducers (about 900 in China) and the first ten producers only accounted for 27% of the market in
2005. These figures contrast with both the suppliers’ and clients’ sides. In the iron market, the
Australian CVRD and BHP Billiton and the Brazilian Rio Tinto make up 80% of all production, which allow them to control the prices. When it comes to clients, we notice that many sectors are also fairly concentrated such as the car industry. In 2005, a combination of both the economic conjuncture and the market structure created favorable conditions for the consolidation of the steel industry, with many producers seeking external growth. The leader among them, Mittal Steel, wanted to see the emergence of three to four global groups producing 80 to 100 million tons of steel per year. The creation of such groups would give them an ability to directly influence prices and production levels.
However, the attack of Arcelor was not just an impulse driven by the economic context.
Arcelor was a major player in the industry: a world leader in terms of sales and second in production after Mittal Steel. The crucial reason for the merge was that Arcelor and Mittal Steel complimented each other in many ways. Together, they would form an unrivaled leader, producing more than three times the quantity of steel of their closest competitor Nippon Steel. The steel coming out of

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