London, Jan. 27: Lakshmi N. Mittal and his son, Aditya, held a news conference in London today to announce their Mittal Steel Company had made a $22.8 billion bid for their biggest rival, Luxembourg-based Arcelor.
If the merger goes through ' and the initial reaction from Arcelor has been negative ' it would produce the world’s first 100-million tonne steel company, with 320,000 staff located in 61 plants in 27 countries.
Given the dramatic nature of the announcement, the choice of venue for the news conference was suitably cinematic and theatrical ' the headquarters of BAFTA (the British Academy of Film and Television Arts) at 195, Piccadilly, in London’s West End. The theatre was packed with journalists representing media from all over the world.
Although Aditya said that the enlarged company would be prepared to make Luxembourg its headquarters, rather than London, where Mittal Steel is based, his father clarified: “London is my home ' that will not change.”
While Lakshmi Mittal, 54,is chairman of Mittal Steel, his son, Aditya, is president and chief financial officer.
When someone asked whether Aditya had got his job because he was his father’s son, both he and his father replied the job had been won on merit.
Sitting in the front row were Mittal’s daughter, now known as Vanisha Mittal Bhatia, her husband, Amit Bhatia, and Aditya’s wife, Megha.
Mittal hit the headlines in Britain when he held a lavish wedding in France for Vanisha in June 2004, but today the talk was strictly about steel.
At one point, though, he was asked how he felt about the proposed merger, considering he was already listed as “the richest man in Britain”, with a fortune estimated at '14.8 billion.
He gave a typically Indian reply: the way he felt before he was called the richest man was exactly the way he felt after he was called the richest man.
“We are very excited about this morning’s developments,” said Mittal. “The most important thing is that we are offering a 27 per cent premium on yesterday’s closing of Arcelor shares which are at an all-time high. The whole idea is that this is the merger of two giant companies, Arcelor and Mittal Steel. They are creating a more than 100-million-tonne company which is the most important step forward for the consolidation of the steel industry.”
He added: “The last 10 years have seen a major shift towards consolidation of the steel industry. Both Mittal Steel and Arcelor have been at the forefront of this consolidation and share a similar vision for the future of our industry. This combination accelerates this process and leaves us uniquely positioned to benefit from the opportunities created.”
Arcelor declined to comment today but Mittal told reporters that Arcelor’s chief executive, Guy Dolle, had rejected the idea of a merger on January 14.
Mittal argued: “Today, this transaction creates the most powerful, unprecedented transaction in the steel industry. The good thing is that these assets are complementary to each other. There is hardly any competition, hardly any overlapping, in terms of products, geographical areas, customers. This is a very important transaction for the shareholders of both the companies.”
He predicted more mergers in the steel industry. “We will see more and more consolidation activities going forward.”
Analysts said Mittal’s plan would go a long way to addressing the fragmented steel industry’s perennial problem of struggling to rein in capacity during an economic downturn, and steel shares across the world rallied on hopes of more deals.
“This is unbelievable. Pressure on other steel companies to consolidate obviously increases,” said Michael Tappeiner, an industry analyst. “The increased consolidation is very positive for steel pricing levels because you will probably have more production discipline and better pricing.”
The European Union’s anti-trust chief said she would look closely at the potential deal.
“We should give it a very close eye,” EU Competition Commissioner Neelie Kroes told Bloomberg Television.
However, some analysts thought a tie-up would not run into too many problems with competition regulators.
“Mittal and Arcelor would match very well. Mittal is leader in the United States, Arcelor in Europe. Within Europe, Mittal is leader in Eastern Europe, while Arcelor is market leader in Western Europe,” said Delta Lloyd Securities’ Gert Biesmans.
Mittal said the offer was at “a very attractive premium” and urged Arcelor shareholders to accept. “We would encourage them to consider the merits of our compelling offer and play a part in the future of the world’s only global steel company,” he said.