Mittal phobia hits global steel cos
These cos are busy devising strategies to meet the challenges posed by the Mittal-Arcelor merger.
By Javed Sayed, TNN |
NEW DELHI: Call it the Power of Mittal. Or the Steely Defence. Steel makers across the globe are busy devising strategies to meet the challenges posed by the Mittal-Arcelor merger to the fragmented steel industry. They are looking at a mix of defensive options such as ramping up shareholding, buying back equity, entering into anti-takeover pacts, as well as aggressive options such as acquisitions and mergers, amid expectations of the mega merger triggering off fresh consolidation and new hostile takeover attempts in the steel industry.
In India, the ball has been set rolling by Tata Steel, where the Tatas have decided to increase their shareholding in the company from the present level of 27% as a safeguard against a hostile takeover bid.
Variants of what the Tatas are planning here are being contemplated by other large steel manufacturers. Nippon Steel of Japan, which will be the second largest steel company in the world after the Mittal-Arcelor merger, earlier this week announced a $875-million offer to buy back 3.67% of its outstanding stock as part of its strategy to shore up anti-takeover defences. This will be its second share buyback this year.
In addition, Nippon Steel and two other Japanese companies — Sumitomo Metal Industries and Kobe Steel — have got together to make takeovers difficult. They have increased their shareholding in each other and have adopted poison pills to discourage takeover attempts. It is learnt that according to their understanding, if a suitor targets any of the three firms, the other two firms will offer a price per share that is higher than that offered by the suitor as an anti-takeover measure. Also, the firms not being targeted will increase their investments in the targeted firm and thereby decrease the number of shares available for the hostile suitor.
Independently, Kobe Steel has also set up a committee to examine whether new equity warrants should be issued to prevent a hostile takeover bid.
While the Japanese companies have resorted to defensive mechanisms, others are looking at aggressive measures. A day after the Arcelor board approved the Mittal bid on June 25, the second largest Australian steel company, OneSteel, announced that it will buy the country’s third largest producer, Smorgon Steel Group, for $2.9 billion, The objective of this acquisition is to consolidate and fend off competition from companies in China, South Korea and Taiwan.
The largest German steelmaker, ThyssenKrupp, has indicated it is looking at a possible major takeover, although it has no target right now. Steel analysts in the US have speculated that ThyssenKrupp may be eyeing takeovers in North America. Nucor, A K Steel, and US Steel have been mentioned as possible takeover targets.
In India, the ball has been set rolling by Tata Steel, where the Tatas have decided to increase their shareholding in the company from the present level of 27% as a safeguard against a hostile takeover bid.
Variants of what the Tatas are planning here are being contemplated by other large steel manufacturers. Nippon Steel of Japan, which will be the second largest steel company in the world after the Mittal-Arcelor merger, earlier this week announced a $875-million offer to buy back 3.67% of its outstanding stock as part of its strategy to shore up anti-takeover defences. This will be its second share buyback this year.
In addition, Nippon Steel and two other Japanese companies — Sumitomo Metal Industries and Kobe Steel — have got together to make takeovers difficult. They have increased their shareholding in each other and have adopted poison pills to discourage takeover attempts. It is learnt that according to their understanding, if a suitor targets any of the three firms, the other two firms will offer a price per share that is higher than that offered by the suitor as an anti-takeover measure. Also, the firms not being targeted will increase their investments in the targeted firm and thereby decrease the number of shares available for the hostile suitor.
Independently, Kobe Steel has also set up a committee to examine whether new equity warrants should be issued to prevent a hostile takeover bid.
While the Japanese companies have resorted to defensive mechanisms, others are looking at aggressive measures. A day after the Arcelor board approved the Mittal bid on June 25, the second largest Australian steel company, OneSteel, announced that it will buy the country’s third largest producer, Smorgon Steel Group, for $2.9 billion, The objective of this acquisition is to consolidate and fend off competition from companies in China, South Korea and Taiwan.
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The largest German steelmaker, ThyssenKrupp, has indicated it is looking at a possible major takeover, although it has no target right now. Steel analysts in the US have speculated that ThyssenKrupp may be eyeing takeovers in North America. Nucor, A K Steel, and US Steel have been mentioned as possible takeover targets.
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