Arcelor’s dipped in the merger mould

KOLKATA: Like they say, the more things change, the more they remain the same. Arcelor, which was created back in ‘01 out of a grand merger of Arbed, Aceralia and Usinor, has yet again taken the merger route to grow further.

Born out of merger and determination, as its official website puts it, Arcelor within a short span of five years has raced to reclaim the coveted top slot in global steel rankings. This time, in its latest avatar — ArcelorMittal.

Arcelor, the company in which the Mittal family will hold 43.4%, will for all practical purposes be a very different company from the “old Europe” flavour that it so desperately tried to cling to.

Incidentally, the main reasons behind the merger in ‘06 are fundamentally different from the compulsions that forced a three-way alliance between Arbed (Luxembourg), Aceralia (Spain) and Usinor (France). Last time, it was the very survival of the three companies at stake. Faced with high labour costs, growing raw material expenses and falling margins in key user segments, it had little option but to unite.

Consolidation remains the name of the game. Its just that the stakes have just got bigger. From a three nation steel company Arcelor, in its new incarnation as ArcelorMittal, is now set to emerge as a giant with a footprint in 27 countries.

This time round, Arcelor was described by LN Mittal at Monday’s joint press meet as “a young bride who finally succumbs in the face of relentless pursuit by an older suitor for the last five months.” Joseph Kinsch, chairman of the merged entity chose to describe it as a “reasonable marriage”.

But then, LN Mittal is no stranger to arranged marriages. Even though his empire grew out of privatisation of public sector steelworks, in eastern Europe, the acquisition of Sidex plant in Romania and Kryviy Rih plant in Ukraine have been difficult ones.

The formation of Arcelor was successful to say the least. It grew through a series of acquisitions over the last five years to emerge into a 43.5m tonne behemoth. It grabbed leadership positions in both volume and in terms of quality of its product range.

M&A is second nature to Arcelor. It bagged Dofasco of Canada after an intense battle with TyssenKrupp of Germany, even as tried to fend off what was then seen as a “hostile” takeover bid by Mittal. It picked up 24% stake in IUP-Jindal, a joint venture in India with the OP Jindal group, through IUP, its stainless steel division.

Arcelor also made an attempt to deflect the bid through another M&A. Russian oligarch Aleksei Mordashov’s SeverStal was brought in as a white knight to fight it out. And last Friday, Arcelor announced a 65:35 joint venture with Mitsui in Brazil, even as its top management was locked in tough negotiations with Mittal’s team of deal crackers.