Mittal has Arcelor rolls for continental breakfast
Only time will tell whether the gamble to seal the bid at a 52% premium over the original bid price will pay off.
By TNN |
NEW DELHI: He has this habit of weaving fairy tales in June. Exactly two years ago, in the third week of June, Laxmi Niwas Mittal enacted one of the most grandiose wedding ceremonies ever. Daughter Vanisha, in a Rs 200-crore rite, got married at Louis XIV’s Palace of Versailles and Vaux le Vicomte, with Shah Rukh Khan dancing and Kylie Minogue singing. Another year, another June, and another dream comes true in true fairy tale fashion. After a year of roller-coaster courting Mittal Steel marries Arcelor in a 100-m plus tonne steely affair.
Flashback to February ’06. Mr Mittal was a man under siege. The richest Indian on earth was back home to attend a private function, but the shadow of Arcelor rejection followed wherever he went. Arcelor CEO Guy Dolle had just launched a full-fledged war against the Mittal Steel offer, the governments of Europe had voiced their opposition to the deal, and it appeared that large swathes of media in France and other countries had ganged up against him.
And yet, not once, during the course of a 90-minute conversation with ET on a Sunday evening that February, did the 55-year-old Mr Mittal raise his voice in anger or betray any nervousness at the magnitude of the challenge that lay ahead. “I am not thinking about the deal not going through. I am confident. This transaction has full shareholder support,” he had told us.
Today, his words may appear prophetic. Yet, as the fact that Arcelor is finally his, sinks in, only Mr Mittal will be able to tell how much of these words were borne out of conviction and how much out of bravado. Certainly, at times the odds did seem to be heavily stacked against him, never more so than a month ago on May 25, when it appeared that the Arcelor-Severstal merger would decisively wreck his dreams of creating the world’s first truly global steel giant. And even now, there will be many who will question whether he has overpaid to fulfil his dream and obtain his heart’s desire.
Mr Mittal’s grand obsession for Arcelor began in October ’05, when he found himself bidding against Arcelor for an Ukranian steel company. That’s when the idea struck him: why fight Arcelor all the time, just acquire it. “We paid $4.8bn for our acquisition in Ukraine and the fight was between us and Arcelor,” he says. And once the idea seized him, the advantages of such a deal became blindingly obvious. Here was an opportunity to merge the two-largest steel companies in the world with an unparalleled geographical footprint, create price discipline in the steel industry, improve bargaining power vis-à-vis consumers and raw material suppliers, reap massive cost synergies, and leave the competition far behind.
Only time will tell whether the gamble to seal the bid at a 52% premium over the original bid price will pay off. But then, you do not become the world’s fifth richest man and create the largest steel company in the world from scratch in less than 20 years without thinking big, taking risks and possessing nerves of steel. Indeed Mr Mittal’s career graph presents a case study for Indian entrepreneurs aspiring to go global on what can be achieved in one lifetime.
Mr Mittal’s love affair with steel began in Indonesia in the mid-70s, where his family set up a steel rolling mill. In 1989, he took over a plant in Trinidad. Next came Mexico and Canada, and by the time he parted with his brothers in 1994-95, to focus solely on international operations, his company‘s steel capacities had swelled up to 5m tonnes. His first big ticket take-over took place in 1995 with the acquisition of Kazakhstan’s national steel plant, Karmet, which he was successful in turning around.
The next 10 years saw a spate of acquisitions, primarily in East and Central Europe, and in Algeria and South Africa. His strategy was to buy ailing, ageing plants; replace existing managers with his crack team; bring purchasing efficiencies; improve operations; shift to production of higher value goods; integrate with other group companies; and divest non-core assets.
Till ’04, Mr Mittal’s acquisitive tendencies were focussed on emerging markets. In October ’04, however, he pulled off a coup by announcing a deal that created the largest steel company both in the US and the world. In a two-step transaction, he first merged his European companies — Ispat International and LNM Holdings — in a $13.3bn merger. The new entity, Mittal Steel, in turn acquired the US steel major, International Steel Group (ISG), for $4.5bn.
The Arcelor deal makes Mr Mittal’s company bigger and gives him access to Western Europe, the one market where he did not have much of a presence. It remains to be seen how the markets react and what the deal does to his personal wealth. But one thing is beyond doubt. The richest Indian has just won the biggest battle of his life. And if the wedding he organised for his daughter a couple of years ago in France is any indication, Mr Mittal sure knows how to celebrate in style.
Flashback to February ’06. Mr Mittal was a man under siege. The richest Indian on earth was back home to attend a private function, but the shadow of Arcelor rejection followed wherever he went. Arcelor CEO Guy Dolle had just launched a full-fledged war against the Mittal Steel offer, the governments of Europe had voiced their opposition to the deal, and it appeared that large swathes of media in France and other countries had ganged up against him.
And yet, not once, during the course of a 90-minute conversation with ET on a Sunday evening that February, did the 55-year-old Mr Mittal raise his voice in anger or betray any nervousness at the magnitude of the challenge that lay ahead. “I am not thinking about the deal not going through. I am confident. This transaction has full shareholder support,” he had told us.
Today, his words may appear prophetic. Yet, as the fact that Arcelor is finally his, sinks in, only Mr Mittal will be able to tell how much of these words were borne out of conviction and how much out of bravado. Certainly, at times the odds did seem to be heavily stacked against him, never more so than a month ago on May 25, when it appeared that the Arcelor-Severstal merger would decisively wreck his dreams of creating the world’s first truly global steel giant. And even now, there will be many who will question whether he has overpaid to fulfil his dream and obtain his heart’s desire.
Mr Mittal’s grand obsession for Arcelor began in October ’05, when he found himself bidding against Arcelor for an Ukranian steel company. That’s when the idea struck him: why fight Arcelor all the time, just acquire it. “We paid $4.8bn for our acquisition in Ukraine and the fight was between us and Arcelor,” he says. And once the idea seized him, the advantages of such a deal became blindingly obvious. Here was an opportunity to merge the two-largest steel companies in the world with an unparalleled geographical footprint, create price discipline in the steel industry, improve bargaining power vis-à-vis consumers and raw material suppliers, reap massive cost synergies, and leave the competition far behind.
Only time will tell whether the gamble to seal the bid at a 52% premium over the original bid price will pay off. But then, you do not become the world’s fifth richest man and create the largest steel company in the world from scratch in less than 20 years without thinking big, taking risks and possessing nerves of steel. Indeed Mr Mittal’s career graph presents a case study for Indian entrepreneurs aspiring to go global on what can be achieved in one lifetime.
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Mr Mittal’s love affair with steel began in Indonesia in the mid-70s, where his family set up a steel rolling mill. In 1989, he took over a plant in Trinidad. Next came Mexico and Canada, and by the time he parted with his brothers in 1994-95, to focus solely on international operations, his company‘s steel capacities had swelled up to 5m tonnes. His first big ticket take-over took place in 1995 with the acquisition of Kazakhstan’s national steel plant, Karmet, which he was successful in turning around.
The next 10 years saw a spate of acquisitions, primarily in East and Central Europe, and in Algeria and South Africa. His strategy was to buy ailing, ageing plants; replace existing managers with his crack team; bring purchasing efficiencies; improve operations; shift to production of higher value goods; integrate with other group companies; and divest non-core assets.
Till ’04, Mr Mittal’s acquisitive tendencies were focussed on emerging markets. In October ’04, however, he pulled off a coup by announcing a deal that created the largest steel company both in the US and the world. In a two-step transaction, he first merged his European companies — Ispat International and LNM Holdings — in a $13.3bn merger. The new entity, Mittal Steel, in turn acquired the US steel major, International Steel Group (ISG), for $4.5bn.
The Arcelor deal makes Mr Mittal’s company bigger and gives him access to Western Europe, the one market where he did not have much of a presence. It remains to be seen how the markets react and what the deal does to his personal wealth. But one thing is beyond doubt. The richest Indian has just won the biggest battle of his life. And if the wedding he organised for his daughter a couple of years ago in France is any indication, Mr Mittal sure knows how to celebrate in style.
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