Mittal-Arcelor: Saga of a bidding war

26 June 2006

It was on January 27 this year, Lakshmi Mittal, CEO of Mittal Steel, announced a hostile bid for his main competitor and the world's second-largest steel company, the Luxembourg-based Arcelor. Just three days earlier, Arcelor had grabbed Canadian steel maker Dofasco in a hostile bid. (See: ThyssenKrupp backs out, Arcelor wins Dofasco)

The idea of a bid reportedly came from Aditya Mittal, Lakshmi Mittal's 30-year old son and CFO of Mittal Steel. If true, this would be the right stuff for legends when the younger Mittal emerges from his father's shadow in future.

Lakshmi Mittal argued that consolidation would be vital in the steel industry to regain pricing power and protect the industry from cyclical swings. A Mittal-Arcelor merger would see a steel giant that would control around 10 per cent of global capacity and nearly 13 per cent of current output. It would be the first ever steel company with a capacity of 100-million tonnes per annum and would be thrice the size of its nearest competitor. The combined entity would have a wide presence across geographies and product segments.

Initial reaction of Arcelor's management was of disbelief. Arcelor CEO Guy Dolle, was extremely hostile and acerbic with a hint of racist prejudice. Guy Doll called Mittal Steel "a company run by Indians" having a "monoculture management", while Arcelor was run according to "European cultural values".

Mittal Steel was characterised as a family run company with the father-son duo of Lakshmi Mittal and Aditya Mittal running the show. Arcelor produces 'perfume' while Mittal Steel turns out 'eau de cologne', Guy Dolle said referring to Arcelor's focus on superior quality high-margin products. He indirectly boasted that Arcelor had a superior management and strategic vision.

European politicians went in to hectic confabulations on how best to block the hostile bid and keep the predator at bay. French foreign minister Thierry Breton, reacted to the news of Mittal's bid by touring European capitals to drum up support against the proposed acquisition, referring it as an act of "economic patriotism". (See: EU Competition Commissioner attempts to calm hostility to L N Mittal's Arcelor bid)