Lakshmi Mittal and the Growth of Mittal Steel

Since its inception, ArcelorMittal has rapidly grown through a successful consolidation strategy with a number of significant acquisitions. According to ArcelorMittal (2012), the company is the successor to Mittall Steel, a business originally set up in 1976 by Lakshmi N. Mittal, CEO and chairman of the board of directors (paras 1-2).

ArcelorMittal moved the company’s headquarters to Rotterdam in 1997 (Hill, 2011, p. 261). The company currently has 260,000 employees across 60 countries and is the world’s leading steel and mining company (ArcelorMittal, 2013, para 1).

In addition to the information above, a brief timeline of ArcelorMittal acquisitions may be reviewed below (Steelonthenet.

com, 2013, para 2). The company has been quite successful.

• 1989: Acquired Iron & Steel Company of Trinidad & Tobago.
• 1992: Acquisition of Sibalsa in Mexico.
• 1994: Acquisition by Ispat of Sidbec-Dosco in Canada.
• 1995: Acquisition of Karmet Works in Kazakhstan.
• 1995: Acquisition of Hamburger Stahlwerke in Germany.
• 1997: Ispat International floats in NY & Amsterdam.
• 1997: Takeover of Thyssen Duisberg, Germany.
• 1998: Acquisition of Inland Steel Company, USA.
• 1999: Ispat purchase of Unimetal, France.
• 2001: Purchase of Sidex Galati in Romania.
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• 2001: Purchase of Alfasid [renamed Mittal Steel Annaba] in Algeria.
• 2001: Equity partnership deal with Iscor, South Africa.
• 2003: Acquisition of Nova Hut in Ostrava, Czech Republic.
• 2004: Acquisition of Skopje plant from Balkan Steel, Macedonia.
• 2004: LNM Holdings & ISPAT International merged into Mittal Steel.
• 2005: Purchase of PHS - Polskie Huty Stali in Poland.
• 2005: Mittal Steel takeover of the International Steel Group, USA.
• 2005: Acquisition of Kryvorizhstal, Kryvyi Rih in Ukraine.
• 2005: Purchase of small stake in Hunan Valin, China.
• 2005: Iron ore mining agreement with government of Liberia.
• 2005: Unsuccessful bid for Erdemir Group, Turkey.
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• 2006: Acquisition of Arcelor and creation of ArcelorMittal.
• 2007: ArcelorMittal purchase of 100% stake in Galvex, Estonia.
• 2007: Arcelor Mittal finalises acquisition of Sicartsa.
• 2008: Increase of stake in Macarthur Coal Australia to ~20%.
• 2008: Sale of Sparrow's Point to Russia's Severstal.
• 2008: Purchase of three coal mining assets in Russia.
• 2009: Dispute in South Africa over iron ore supply from Kumba.
• 2009: Divestment of minority interest in Wabush Mines, Canada.
• 2010: Spin-off of stainless & specialty steels business into Aperam.
• 2011: ArcelorMittal wins control of Baffinland iron ore mine, Canada.
• 2012: Sale of 48.1% stake in Paul Wurth Group to SMS GmbH.
• 2012: Florange steel closure announced - much political reaction.
• 2012: 15% stake sold in Canada Mines for $1.1 billion.
• 2013: Rumoured interest in purchase of TKS Alabama Calvert mill.
• 2013: Plan announced to raise $3.5bn to lower debt via share issue.

In respect to the information above, I will begin to discuss the case study questions in the next section.

What forces drove Mittal Steel to start expanding across national borders?

According to Hill (2011), one of the major forces that drove Mittal to start expanding across national borders were the limited growth and expansion opportunities because of weak market conditions primarily due to competition from SAIL, a state-owned rival, and a private national champion, Tata Steel (para 1). Thus, Mittal began to look for opportunities across national borders because the market was not good enough for Mittal Steel to grow.

Mittal Steel expanded into different nations through mergers and acquisitions, as opposed to greenfield investments. Why?

Greenfield investments is one form of federal direct investment (FDI) which involves establishing a new operation in a foreign country (Hill, 2011, p. 232). The second FDI is acquiring or merging with a company in a foreign country (Hill, 2011, p. 232).

Thus, Mittal Steel was heavily involved in acquisitions and mergers because the economy had been in a slump for a quarter century due to access capacity and slow demand for steel and a higher demand for substitute materials (Hill, 2011, p. 261). Mittal had a successful business, expertise, and capital to help struggling businesses. In addition, he saw an opportunity to purchase the assets of struggling businesses for cheap (Hill, 2011, p. 261). According to Hill (2011), Mittal believed that eventually the economy will turn around (p. 261).

What benefits does Mittal Steel bring to the countries that it enters? Are there any drawbacks to a nation when Mittal Steel invests there?

The benefits that Mittal Steel bring to the countries that it enters are the increases in revenue, employment, resources, business expertise, etc. (Hill, 2011, p. 249). One drawback may be that the ownership is held by a foreign business.

What are the benefits to Mittal Steel from entering different nations?

The business becomes a global business. Its assets increased by acquiring other businesses that were having problems. In addition, this allowed Mittal to diversify itself. For example, it was able to make an Initial Public Offering (IPO) to the public in Amsterdam and New York stock exchanges as an effort to raise capital (Hill, 2011, p. 261). This increased its buying power to acquire additional struggling businesses. The ultimate benefit is that it is now the leading steel and mining company.

The acquisition of Arcelor was very acrimonious, with many politicians objecting to it. Why do you think they objected? Were their objections reasonable?

I believe the objection was mainly due to the fact that a European business was acquired by a foreign entity – Indian, now legally Dutch (Hill, 2011, p. 261).

This an interesting and thought provoking case concerning mergers and/or acquisitions.

References

ArcelorMittal (2013). ArcelorMittal-transforming tomorrow. Our history. Retrieved on January 23, 2013 from http://www.arcelormittal.com/corp/who-we-are/our-history

ArcelorMittal (2013). ArcelorMittal-who we are at a glance. Retrieved on January 23, 2013 from http://www.arcelormittal.com/corp/who-we-are/at-a-glance

Hill, C. (2011). International Business: Competing in the Global Marketplace. McGraw-Hill/Irwin, New York.

Steelonthenet.com (2013). History of ArcelorMittal. Retrieved on January 23, 2013 from http://www.steelonthenet.com/kb/history-arcelor-mittal.html