The Outsider

Politicians from France, UK, Luxembourg and India joined in the slanging match even as Arcelor shareholders waited for Mittal to better his offer so that they could cash out at a never-before opportunity.

Described as a step in the 8216;8216;consolidation of the global steel sector,8217;8217; the merger between Mittal Steel and Arcelor will create a Rs 303,609 crore corporate giant with 320,000 employees across the world. The new entity will be three times larger than its closest rival. It will control 10 per cent of global steel production, with Mittal owning 50.7 per cent share in the new company.

Minor Trophies
MITTAL started building his global empire by helping his father set up a steel plant in Indonesia when India was under Emergency. His 2005 merger of all the holding firms of his steel companies made him the world8217;s No. 3 billionaire, just behind Microsoft8217;s Bill Gates and hedge fund guru Warren Buffett.

Hailing from the poor Rajasthan village of Sadulpur, the Mittal family first shifted to Karachi to set up a small steel trading business. Soon after Partition, the family shifted base to Kolkata to set up a steel trading business. LNM8217;s father Mohanlal, who made his lakhs by trading steel in the post-World War II construction boom, set up small steel furnaces near Kolkata and even started looking abroad to expand his business with the help of his eldest son, Lakshmi.

The father, helped by his St Xavier8217;s College-educated son 8216;8216;who was good in numbers8217;8217;, set up businesses in Indonesia, West Indies and Mexico. In 1994, the family split into two groups, with LNM taking over the international business while younger brothers Pramod and Vinod looked after the Ispat group8217;s companies in India. Mohanlal today stays with his second son Pramod in London even as their Alipore house wears a deserted look.

The only scandal to have touched the all-vegetarian Mittal involved a Rs 1 crore donation to British Prime Minister Tony Blair8217;s Labour party just before the 2001 British election. As a quid pro quo, Blair wrote a letter a few weeks later supporting Mittals8217;s bid for a state-owned Romanian steel firm. Mittal wrote yet another cheque, for Rs 16 crore, four years later as donation to Labour Party; it was one of the largest Blair8217;s party had ever received.

His only other brushes with Page Three came during his children8217;s weddings. For his son Aditya8217;s nuptials, LNM hired Kolkata8217;s historic Victoria Memorial; for his daughter Vanisha, he went one better by renting the Versailles palace in Paris for the Rs 272-crore mega-wedding. In 2003, Mittal made headlines again by buying London8217;s most expensive private residence from Formula

One tycoon Bernie Ecclestone for Rs 560 crore.

Buy, buy, buy
AFTER getting control of Ispat8217;s group8217;s international business in 1994, Mittal went on an acquisition drive by buying sick and government-owned steel companies across the world. In the last 12 years, he has bought over 19 companies from Canada to China see graphic.

Today, plants owned by Mittal ship over 40 million tonnes of steel every year from 14 countries, including Romania, Bosnia-Herzegovina, South Africa, Poland, Indonesia, Kazakhstan, Ukraine and the US. He is now eyeing India to set up a 12 million tonnes per annum plant in Jharkhand at a cost of Rs 40,000 crore.

In a presentation to steel analysts in London, Mittal said the merger between Arcelor and Mittal Steel would save Rs 4,400 crore in costs and that both companies would complement each other across the world. With Arcelor8217;s strong presence in western Europe and Latin America and Mittal8217;s in North America, Eastern Europe and increasingly China and later in India, the acquisition will give Lakshmi Mittal number one position in across all regions.

But ratings agencies have warned that Mittal Steel8217; ratings are at risk if the offer climbs from the current table figure. 8216;8216;Mittal is highly rated for the steel industry but there are numerous risks surrounding the acquisition plans, including the high likelihood the price will need to be raised,8217;8217; rating firm Fitch warned in a post-announcement note.

Continental Drift
RAISING the offer is something Mittal had thought about but what he had not bargained for was the political storm his bid created in a highly suspicious European establishment. 8216;8216;This hostile bid calls for a reaction that is at least as hostile,8217;8217; said Jean-Claude Juncker, Prime Minister of Luxembourg, where Arcelor has its headquarters.

The French reaction was equally against the bid. Prime Minister Dominique de Villepin said that Mittal8217;s hostile bid emphasised the need for French companies to organise their capital better to withstand attacks and for Europe to rethink its competition rules to build 8216;8216;industrial champions8217;8217;.

Some political leaders even suggested new anti-competition laws to block the deal.

This led to Mittal making daily visits to the Paris, Luxembourg and Brussels, where the European Commission is based, to convince the political leadership that not a single job will be lost.

Arcelor, on the other hand, has urged its shareholders not to sell their shares to Mittal. In a statement, it said the two companies did not 8216;8216;share the same strategic vision, business model and values8217;8217;.

While the entire European establishment batting for Arcelor and its 63-year-old CEO Guy Dolle leading the battle against Mittal, Indian Commerce Minister Kamal Nath has jumped into the fray. 8216;8216;We are closely watching the developments. As an Indian, I am happy about the bid made by an Indian. When Lafarge was taking over the cement companies in India we welcomed it,8217;8217; said Nath.

Nath also threatened that the ongoing World Trade Organisation talks could get derail if Mittal8217;s bid was obstructed on 8216;8216;racial8217;8217; grounds.

While Mittal should feel happy about the government support, Indian steel makers think otherwise. 8216;8216;On what basis can Lakshmi Mittal be called an Indian? His companies are based abroad, he has lived in London for decades,8217;8217; points out a top official of an Indian steel firm requesting anonymity. 8216;8216;He is now planning to set up a plant in India because he needs iron ore to feed his plants across the world.8217;8217;

Vinod Mittal, younger brother of Lakshmi Mittal, also refused to comment on the issue. However, company insiders say since the family split, the Mittal brothers do not talk about each other8217;s businesses.

Ore Strength
IF steel analysts are to be believed, the Mittal Steel and Arcelor merger is good news for the latter8217;s shareholders. They are getting 27 premium of their shares in cash, plus Mittal Steel8217;s shares.

Though a lot of analysts are questioning Mittal on the corporate governance issue8212;both his son and daughter are on the board of Mittal Steel8212;Mittal has made it clear that his son, who is now CEO, is competent enough to handle the pressure of the job.

If the bid is successful, Mittal will have a leading position in NAFTA, European Union, Central Europe, Africa and South America. With Mittal8217;s steel plant now getting ready in India and China and tying up raw material supply, the company will have a high degree of iron-ore self-sufficiency.

The European political opposition to the deal is also expected to calm down as Mittal offer is not violating any current merger or acquisition laws of Europe. With trade barriers across the world now coming down, the Mittal bid should not have any problems in getting through. If the reaction from analysts is any indication, Mittal need not worry. The colour of money will take preference over any nationalist fervor.