|
Published December 7, 2007 at 7:00 AM
|
 Mighty Mittal Steel Co. NV never lost its resolve and won its target Arcelor SA in July 2006 with a $33.5 billion deal to create the world's largest steel company. And ArcelorMittal has continued to swell.
Continue reading below
A 2007 recap:
- The company's latest news came Dec. 7 in the form of a bid for controlling stake in China Oriental Group Co. Ltd., valuing the target at $2.3 billion, weeks after it agreed to pay $647 million for a 28% interest in the company to expand its reach in the massive market.
- On Dec. 4, ArcelorMittal said it would pay as much as $1.76 billion for the 43% stake of its Brazilian unit it does not own; pick up NSD Ltd., a Scunthorpe, England-based steel distributor, for undisclosed terms; and that its chairman, Joseph Kinsch, planned to step down while CEO Lakshmi Mittal, who masterminded the steelmakers' union, would add the role to his duties and relinquish his additional role of president.
- The company tacked on three deals in late November: a joint venture with South Africa's Kalagadi Manganese for a reported contribution near $315 million; a memorandum of cooperation with the Republic of Mozambique; and plans to take a 12.6% stake in Nevada molybdenum supplier General Moly Inc. for $70 million.
- Kicking off October, ArcelorMittal said it would pay $542 million for the 34.7% of Argentina's Acindar Industria Argentina de Aceros SA that it does not own.
- Sept. 10, the company unveiled plans to acquire a 51% stake in Turkey's Rozak AS for undisclosed terms.
- In early September, ArcelorMittal took full control of Canadian iron ore and pellet producer Wabush Mines for $67 million.
- On Aug. 2, ArcelorMittal announced a deal to sell Sparrows Point, a Maryland mill, for what analysts have pegged at nearly $2 billion to a joint venture between Esmark Inc. and Wheeling-Pittsburgh Corp. with industry and institutional investors. The move is the latest divestiture that antitrust authorities have insisted upon for the company.
Amid a flurry of dealmaking, ArcelorMittal hasn't escaped shareholder wrath. A group holding nearly 6% of the target's shares, which sought to block the deal bringing the two companies together, on Aug. 27 lost a bid for an injunction against the merger. The case stemmed from a complaint over share exchange ratios, a figure that has dipped from 11:7 Arcelor to Mittal shares last year to a current ratio of 8:7. The company maintains there is no law stipulating the ratio must be maintained. In a final vote Nov. 5, Arcelor shareholders approved the deal. Minority investors, including SRM Advisers and Trafalgar Asset Management Ltd., also said Nov. 5 they planned to file suit against Arcelor and Mittal Steel's boards.
A LONG BATTLE
As the tall task of integration got underway in late 2006, the company threw a little something else into the mix Dec. 20 -- a $1.4 billion play for a steel mill owned by Mexico's Grupo Villacero, with hopes of realizing $130 million in synergies from the deal.
The news came two weeks after ArcelorMittal bid adieu to the first unit on its to-be-disposed list, steel recycler Stahlwerk Thüringen GmbH, for which Spanish steelmaker Grupo Alfonso Gallardo agreed to pay a lofty $785 million. With just a few divestitures remaining at the time, the company unveiled a five-year €17 billion ($23 billion) refinancing deal with 26 banks, with attractive terms, analysts said, pointing out that access to cheaper financing was one of the pluses Mittal touted as it went after Arcelor. So, all in all, not such a bad shake for one steely company determined to win its target, no matter how difficult the battle.
In a deal marked by stubborn resolution on Mittal's end and creative measures to fend off a takeover attempt on Arcelor's end, neither side was willing to give in, until Arcelor finally did. In a Deal newsweekly cover story Oct. 23, 2006, The Deal's David Marcus sheds some light on how Mittal pulled off such a feat and in February weighed in on the implications.
A MASTER PLAN
During the months-long takeover battle, talks between Mittal and Arcelor started and stalled repeatedly.
- Mittal first unveiled takeover plans in January 2006 for its rival, which Arcelor promptly rebuffed and criticized for having little or no integration strategy.
- In a plan orchestrated by chief executive Laskhmi Mittal, the deal derailed a pending Arcelor buy for Canadian rival Dofasco Inc. Mittal said he would unload the Canadian asset for $4.6 billion to Germany's ThyssenKrupp AG, which Arcelor beat out in a bidding war for Dofasco just days before. ArcelorMittal, however, then battled the unit's directors, who through refusing to dissolve what was a Dutch legal entity, effectively blocked the sale. U.S. regulators demanded ArcelorMittal sell Dofasco, or either Mittal's Sparrows Point facility or Mittal's Weirton facility located in Weirton, W.Va.
- Left, then, on the list to be divested due to an agreement with European Commission regulators were Mittal's Travi e Profilati di Pallanzeno mill in Italy and Huta Bankowa in Poland.
- For a while Mittal has stood firm that it had put forth its only offer pending regulatory clearance. That is, until May 9, 2006, when it changed its mind and offered to marginally sweeten the pot, should Arcelor's board be game.
- The move was in response to a statement from Arcelor's chairman Joseph Kinsch late May 8, 2006 that he was willing to talk, but only with further information from Mittal.
WE'LL SHOW THEM
Meanwhile, in its attempt to beat back Mittal, Arcelor displayed dramatic resolve.
- Earlier in 2006, Arcelor reported strong 2005 earnings as its chief executive, Guy Dollé, remained "quite confident" the company would remain independent.
- In a move to show that it didn't need a megamerger, Arcelor added two international assets to its portfolio in February and March 2006: 38.41% of China's Laiwu Steel Corp. Ltd. for $261 million; and a 50% stake in Moroccan steel company Société Nationale de Sidérurgie SA for nearly $289 million.
- In April 2006, Arcelor's board re-elected chairman Joseph Kinsch and vice chairman José Ramón Alvarez Rendueles despite modest dissent. Kinsch said he considered it a victory that the pair was allowed to stay.
- The same day, the company also confirmed investor Romain Zaleski had upped his 3.5% stake in the company to more than 4% and he would be contacted about his intentions. He has long been rumored as a white knight for the target, taking a stake large enough to thwart Mittal's advance.
BEGINNING OF THE END
- In a move to demonstrate Arcelor did need a megamerger, the company made a $16.6 billion bid in May 2006 for Russia's OAO Severstal to generate the world's largest steel company and thwart Mittal's takeover plans, but it was met with much shareholder disapproval. The company was slapped with a law suit by the France-based shareholder lobbyist Association de Défense des Actionnaires Minoritaires, or Adam, over the proposed merger.
- The steel company then hit an embarrassing setback, canceling a shareholder vote scheduled on a planned €5 billion share buyback.
- Days later, nearly one-third of Arcelor stakeholders rose up against the proposed Severstal deal, demanding Arcelor management undertake an independent valuation of the deal, and threw their support behind a Mittal request for an extraordinary general meeting to discuss the controversial purchase, which could have been the first crack in the standoff against Mittal.
Mittal finally won its target in July 2006, and the deal created a steelmaking juggernaut with $60 billion in sales and a market capitalization more than 3 times that of its closest rival, Japan's Nippon Steel Corp.
In retrospect, Marcus noted:
If the hurdles that Mittal had to surmount show the survival of protectionist sentiment in Europe, the company's eventual success demonstrates that deals inconceivable in the EU a decade ago are now possible even for upstarts such as Mittal, a reality that will reverberate for years.
--Carolyn Murphy
| Dealwatch executive summary |
The Date |
The Action |
| 12.07.07 |
ArcelorMittal bids for control of China Orienta. |
| 12.04.07 |
Mittal to take over as chairman; ArcelorMittal is in two deals. |
| 11.20.07 |
ArcelorMittal unveils deal trio. |
| 11.07.07 |
ArcelorMittal picks up 28% of China Oriental Group Co. Ltd. |
| 10.2007 |
ArcelorMittal to pick up the balance of Argentina's Acindar. |
| 9.11.07 |
The company grabs 51% of Turkey's Rozak. |
| 9.06.07 |
ArcelorMittal takes full control of Canadian iron ore and pellet producer Wabush Mines for $67 million. |
| 8.27.07 |
A Dutch court rules against an injunction to block the merger. |
| 8.02.07 |
ArcelorMittal sheds Maryland facility. |
| 2.12.07 |
David Marcus weighs in on the implications of the deal. |
| 12.20.06 |
ArcelorMittal pays $1.4 billion for a Mexican steel mill, foresees synergies. |
| 12.06.06 |
ArcelorMittal sheds Stahlwerk Thüringen. More divestitures to come. |
| 10.23.06 |
How Mittal pulled off such a feat. |
| 7.18.06 |
Arcleor counts its votes and has the minimum necessary for acceptance. |
| 6.26.06 |
Arcelor's defenses may be its worst enemy. |
| 6.25.06 |
Indeed it does, going to its long-time suitor Mittal. |
| 6.25.06 |
Arcelor's board will render a verdict on its preferred future course. |
| 6.23.06 |
Mittal and Arcelor creep closer to a deal. |
| 6.21.06 |
Mittal may have to sweeten its Arcelor offer. |
| 6.20.06 |
Arcelor setbacks could weaken its defense. |
| 6.09.06 |
Arcelor-Mittal talks hit standstill. |
| 6.01.06 |
Angry Arcelor shareholders demand a general meeting to discuss the controversial Severstal buy. |
| 5.30.06 |
Mittal says it remains committed to gaining 51% control in Arcelor. |
| 5.29.06 |
Arcelor shareholders seek a closer look at a Severstal buy. |
| 5.26.06 |
Arcelor launches a $16.6 billion takeover bid for Russia's OAO Severstal. |
| 5.22.06 |
Arcelor softens to its rival saying it is willing to consider a $33.1 billion bid. |
| 5.19.06 |
Mittal raises its offer price for smaller rival Arcelor to $32.9 billion. Meanwhile, Arcelor reportedly plans to hold a board meeting. |
| 5.18.06 |
True to its word, Mittal launches its formal takeover offer, which will remain open until June 29. |
| 5.17.06 |
Mittal sets its Arcelor bid date of May 18, after gaining regulatory clearance in Europe. |
| 5.10.06 |
The EU moves to extend its review of the Mittal-Arcelor deal, imposing a new deadline of June 7, nearly three weeks after the original May 19 date. |
| 5.09.06 |
Mittal finally begins to bend, saying it would be willing to alter the terms of its offer for rival Arcelor ... but only if the target accepts its $25 billion bid. |
| 5.08.06 |
Arcelor says it doesn't have enough information to meet with Mittal, after several requests for a sit-down. |
| 4.28.06 |
Arcelor's board re-elects chairman Joseph Kinsch and vice chairman José Ramón Alvarez Rendueles to its board despite protest from some dissidents. |
| 4.20.06 |
Mittal stands firm on its offer, while criticism mounts over the terms. |
| 4.13.06 |
Arcelor teams with Russian steelmaker Severstal to open a plant in Cherepovets, Russia, to take a stake in Russian automaking. |
| 4.17.06 |
As the deal undergoes review by the U.S. Department of Justice, Mittal is quiet. |
| 4.04.06 |
Arcelor announces a plan to increase its 2005 dividend and pay up to $6.1 billion to assuage shareholders and beat back Mittal. |
| 4.2006 |
The target's strategy to fend off a deal is far-reaching and complex, but still irks shareholders. |
| 4.2006 |
Arcelor's Kinsch meets with Vladimir Lisin to discuss the Russian steelmaker taking a stake in Arcelor to help fend off Mittal. |
| 3.13.06 |
A proposal to amend Luxembourg takeover law that threatens to complicate things for Mittal's Arcelor bid looms. It will later be dropped from pending legislation. |
| 3.06.06 |
Arcelor takes a 50% stake in Morocco's Société Nationale de Siderurgie SA for $289 million. |
| 3.03.06 |
Analysts consider Arcelor powerless to stand up to Mittal and predict the bid will succeed. (See related deal memo.) |
| 2.24.06 |
Arcelor takes a 38.41% stake in China's Laiwu Steel Corp. Ltd. for $261 million. |
| 2.22.06 |
Arcelor emphasizes growth in Turkish market. |
| 2.16.06 |
Arcelor reports strong 2005 earnings and CEO Guy Dollé remains "quite confident" the company will remain independent. |
| 2.15.06 |
Mittal reports its earnings and remains resolute not to up its offer. |
| 2.06.06 |
New takeover laws in the Netherlands will not thwart Mittal's advance as Lakshmi Mittal, its CEO, says he expects the deal to close "long before" they take effect, which is expected in April. |
| 1.30.06 |
Arbs peg Luxembourg as wary buy accepting of a possible deal but see Arcelor vying for a higher price. |
| 1.29.06 |
Arcelor promptly rebuffs Mittal's advance. |
| 1.27.06 |
The Mittal bid threatens to derail the target's pending $4.8 billion bid for Canada's Dofasco Inc. |
| 1.27.06 |
Mittal bids for Arcelor and kicks off a months-long game anchored in stubbornness. |
| 1.27.06 |
Things begin to look up for ThyssenKrupp AG as Mittal signals it will divest Dofasco to the company, should its Arcelor bid succeed. |
| 1.17.06 |
Arcelor lures Dofasco with a three-time sweetened bid, beating out rival ThyssenKrupp AG. |
Source: The Deal |
|
