Lakshmi Mittal is a noted personality worldwide in the steel industry and was born on June 15, 1950 in Sadulpur, Rajasthan. He comes from a business family which was engaged in steelmaking and commerce. He completed his qualifications in Commerce, graduating as a Bachelor from St Xavier's College in Kolkata, after which he joined the family steel business at his father's insistence. However, his family was not aware of the fact that Mittal would not only expand the business but also take it to unprecedented global heights.
In 1976, Mittal started his
business career by purchasing an underperforming steel mill named PT Ispat Indo
in Indonesia. He renamed it Mittal Steel to start off his own company. He
bought several small underperforming steel plants in developing economies
throughout the 1980s and 1990s. Such smaller deals brought quick expansion and
spread out geographically for his firm.
Having achieved success, Mittal
steered towards an opportunity to significantly scale up operations and create
an important global presence. Ambition led him to home in on Arcelor, an
established steel company based in Luxembourg. This strategic vision played an
important role in the formation of Mittal Steel to become a global steel major.
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The Battle Begins
By the end of 2005, the global
steel industry was consolidating rapidly. However, China had already emerged as
the world's largest steel producer, accounting for nearly 30% of global output.
Mittal Steel began to consider strategic steps to further consolidate its
leadership. On January 27, 2006, Mittal Steel made an unsolicited hostile offer
to acquire Arcelor for €18.6 billion. The offer was essentially in stock, with
cash forming a smaller part of it. The operational synergies and global
leadership provided strategic benefits of combining the two companies, Mittal
underlined.
In March 2006, the resistance
began as Arcelor's board rejected the bid, stating that Mittal's offer
undervalued the company and raised troubling questions about corporate
governance. Well aware of Mittal Steel's intentions to buy them out, Arcelor
launched a public relations campaign against the takeover, depicting Mittal
Steel as financially unstable and culturally in conflict. They also approached
the governments of Europe mainly French and Luxembourg to voice their fear of
loss of jobs and national pride. Mittal Steel countered these claims highlighting
its track record of successful integrations and operational efficiencies.
Arcelor had, however announced a share buy-back scheme in April valued at €6.5 billion. This scheme would increase its shareholders' prices and make Mittal to make his offer null. It also proposed a merger with Severstal, a Russian steel manufacturer owned by Alexey Mordashov, in an attempt to block Mittal's offer. This deal would provide Severstal with a majority stake in Arcelor. The moment the news of the merger between Arcelor and Severstal came out, Mittal Steel increased its offer to €25.8 billion, thereby offering a better premium to Arcelor's shareholders. Lakshmi Mittal contacted key shareholders and decision-makers personally to win them over. Arcelor's shareholders started to show their displeasure over the Severstal proposal, because many of the investors thought Mittal would be a better opportunity to generate value.
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Turning Point
In June 2006, investors and shareholders put more pressure on Arcelor, which led its board to think again about its position. The plan to merge with Severstal faced growing opposition from investors who liked Mittal Steel's offer better. Then Arcelor's board said yes to Mittal Steel's new offer of €26.9 billion without any disagreement. This ended months of tough talks and public fights. In July 2006, the companies joined forces. They created ArcelorMittal, which brought together the best parts of both companies to become the biggest steel maker in the world.
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