Merger of Mittal Steel & Arcelor Steel - Case Study Example

Kavitha Yarlagadda 21 February 2007 Arcelor-Mittal One of the largest steel producer in the world Mittal Steel owned by Lakshmi Mittal a non resident Indian steel tycoon, made a $ 23 billion offer to take over its arch rival, Arcelor, this merger would create the first 100 million tonne steel company. The Offer was made to Arcelor with a contract to offer 13 Mittal Steel shares plus '150.6 cash in return for 12 Arcelor shares, the ability to elect, to receive shares or more cash, subjected to 31% cash and 69% stock paid in total, noteworthy payment to Arcelor's pre bid all time share price high, 10.

1% further improvement in the offer based on latest market share price. The conditions laid, were the minimum acceptance should be less the 50%, and there should be no change in Arcelor or the Mittal substance during the offer. The new merged company would be known as ArcelorMittal. The merger between these two steel giants will redefine the global steel industry.The major highlights of the transaction were, joint administration team for successful combination and deliverance of synergies, a merger of the two biggest steel companies in the world without any global rivalry, around '1.3bn (US$1.6bn) of annual synergies, the definite industry leader with extraordinary scale and diversification to manage recur ability, steady earnings and increase shareholder returns, appealing terms for all shareholders and a choice of clear investment with major re-rating prospective.

The financial policy undertaken for maintaining shareholder value creation was to maintain a competent principal structure and to return the excess cash to shareholders, to sustain high returns on the capital, dedicated to investment grade credit ranking, a payout ratio of 30% dividend and unmatched financial flexibility to follow internal and external growth prospects.The vision of ArcelorMittal is to encourage consolidation in a split industry, ability to provide worldwide customers with extensive and deep product contribution, leading in all technologically superior products, to attain the chief position in developed markets in North America and Europe.

To get access to high-growth markets, which are new, like, Latin America, Africa, China and Central and Eastern Europe. Having an international supply network and direct access to raw materials, which results in getting higher profits. Attaining supreme financial flexibility, strong cash flow production facilitating high share payout and the ability to practice value generating growth opportunities. Noteworthy synergy prospective, attaining leadership in R&D/product development, considerable free float and liquidity, which will be positive for all stakeholders.

The other value-enhancing aims were aspiring for commercial leadership based on Arcelor's strong distribution channels, perfect standards in terms of safety, health and protection of the environment, best standards in terms of ethics standards and maintaining development. No plans of restructuring or any plan of reducing the employees with Arcelor in Europe after the merger, targets for high profits. State of the art assets maintained by sound capital expenditure levels, to maintain excellence in the industry of steel.

This merger between the first and second best in the steel industry is bound to create many aspirations in this industry.Works CitedArcelor Recommends Improved Mittal Steel Offer, 25 June, 2006, Find Articles.21 February 2007, .The Clear Leader In Steel, July 2006, Arcelor Mittal. 21 February 2007, .