Mittal’s a perfect fit in the steel frame

Steel’s virtue is that it is malleable and strong. LN Mittal has clearly shown that he shares the characteristics of the metal he loves best, in the manner in which he waged the five-month long takeover battle for the world’s second-largest steelmaker, Arcelor. He deflected or threw off whatever the Arcelor board threw at him.

The long list of volleys directed at Mittal included allegations of mounting a completely unnecessary and uncalled-for hostile bid, no-industrial logic for the deal, remarks on his company’s corporate governance standards and oblique racial references to his bid being a threat to the European corporate culture.

Mittal Steel’s unsolicited bid for Arcelor - termed “150% hostile” by its CEO Guy Dolle and also by other politicians, ostensibly worried about ‘nationalist considerations’ across Spain, Luxembourg and France — after all turned out to be a ‘friendly’ takeover by Mittal, as recommended by the Arcelor board on Sunday, June 25.

What worked in Mittal’s favour was his industrious wooing of Arcelor shareholders’ at every twist and turn of this acrimonious takeover battle.

Mittal waged a media campaign addressing the broad mass of Arcelor shareholders, personally called on large institutional investors, courted politicians across Europe, sweetened the deal twice and capitalised on the opaque nature of Arcelor’s bid to rope in Russia’s Severstal as a white knight.

Mittal was jet-setting across Europe, meeting politicians and big institutional shareholders, and impressing upon them on the industrial merit of Mittal-Arcelor combine through a well-executed business plan that he was willing to share with anyone who cared. He personally met Arcelor shareholders, European politicians including some very vocal opponents of his deal like the French finance minister Thierry Breton, Belgian Prime Minister Guy Verhofstadt and Luxembourg Prime Minister Jean-Claude Juncke. He also called on EU competition commissioner Neelie Kroes and industry commissioner Guenter Verheugen.

Arcelor’s plan to thwart the Mittal bid by bringing in a white knight in the Russia’s Alexei Mordashov-owned Severstal in a way turned out to be Mittal’s biggest advantage. The Arcelor’s board chumming up to Severstal, and more importantly the opaque handling of the logic of Arcelor-Severstal merger sent a large number of institutional shareholders, hitherto merely fence-sitters, right into Mittal’s fold. And Mittal capitalised on it, smartly enough. He quickly announced that he would take a relook at the multiple voting rights that he and his family enjoys in Mittal Steel — 87% controlled by his family - after the merger goes through.

And just days before Arcelor announced its intentions to team up with Severstal, Mittal revised his bid to euro 25.8-billion (euro 37.74 per share), up from the initial euro 18.6 billion, taking some sail out of the argument that his offer for Arcelor was under-valued.

Mittal drummed up the issue of Arcelor shareholders’ getting a short shrift on Arcelor-Severstal deal, through full-page advertisements in leading European newspapers such as The Financial Times, The Wall Street Journal and The International Herald Tribune besides the French national press, claming “Only the Mittal Steel Arcelor combination would be truly transformational deal for the steel industry. A combination with Mittal Steel will also deliver substantially more value to you”.

Arcelor also put out its own ads purporting the deal with Severstal as Take the profitability of the Mittal Steel project, add 23 percent and you have the Arcelor-Severstal project”.

Nonetheless, Mittal’s aggressive reasoning with shareholders forced not just Severstal owner Mordashov to announce a smaller 25% share of the merged Severstal-Arcelor combine, down from the initial 32.3%, but also made Arcelor cancel a crucial shareholder meet where it was planning to ram in a huge, euro 6.5-billion, buyback programme to frustrate Mittal.

In the end, though Mittal had to accept another revision of his bid, this time to euro 40.44 per share, and accepting non-executive president of the board position with Arcelor’s chairman Joseph Kinsch, and majority board representation in the Mittal-Arcelor combine to Arcelor, he managed to prove all sceptics of this deal wrong, including the Arcelor board who has tooth and nail objected to the deal all along and finally came along buying Mittal’s view perhaps in the last ten days or so.