The Hindu : Front Page : Major concessions by Mittal clinched the deal

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Tuesday, Jun 27, 2006

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Major concessions by Mittal clinched the deal

Vaiju Naravane

Arcelor chief executive Guy Dolle to go once merger is firmed up

— Photo: AP

FINE-TUNING THE DEAL: Head of Mittal Steel Lakshmi Mittal (left) with Arcelor chairman Joseph Kinsch at a joint press conference in Luxembourg on Monday.

Paris: Lakshmi Mittal and Joseph Kinsch, chairmen of Mittal Steel and Arcelor, on Monday announced in Luxembourg details of the merger of their companies at a joint press conference.

As per the agreement, Mr. Mittal will become a non-executive president of the new company, Arcelor-Mittal, and Mr. Kinsch will retain his post.

Arcelor's chief executive Guy Dolle, who had made personal attacks against Mr. Mittal, will leave the company once the merger is firmed up.

"I have spoken to Guy Dolle and he thinks that to implement the merger we should now choose a new chief executive," Mr. Kinsch said.

Expressing satisfaction at the merger, Mr. Mittal said he hoped the "marriage" of the two groups would be a happy and lasting one. The new group would employ 320,000 people worldwide, and have an annual output of 116 million tonnes of steel — three times that of its nearest rival, Japan's Nippon Steel.

The price of Arcelor shares rose 6.7 per cent following the merger announcement.

The details of the agreement made it clear that Mr. Mittal had made a series of major concessions to win over Arcelor.

From January, when he first announced his takeover bid, valued at 18 billion euros, Mr. Mittal steadily increased his offer to reach 27 billion euros. The Arcelor stock, valued at 23 euros a share in January, is now priced at 40.40 euros. This is clearly a shareholder victory.

The offices of the new company will be located in Luxembourg and not in Rotterdam, where Mittal Steel is headquartered. The Mittal family will have a 49 per cent stake in the new set-up and will not be in a majority position on the board.

However, on Mr. Kinsch's retirement next year, Mr. Mittal will be at the helm. His son Aditya, now Mittal Steel's Chief Financial Officer, is expected to find a place on the management board. So the family will clearly retain a great deal of influence.

Bitterness in Severstal

There was bitterness in the camp of Russian company Severstal. Its chief Alexei Mordashov has threatened to sue Arcelor for breach of contract.

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