Mittal-Arcelor Merger: Our View...

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The inevitable has happened! The world's second largest steel maker, Arcelor has finally bent to a US$ 32 bn takeover bid by its larger competitor, and world's largest steel maker, Mittal Steel. The combine will create a global steel giant that will be almost 3 times bigger than the nearest rival, Nippon Steel of Japan. The agreement has been arrived at after almost a five-month battle, which has involved, apart from Mittal Steel and Arcelor, several European governments. Parameters Unit Mittal Steel Arcelor Capacity MT 63.0 46.7 Revenues US$ bn 28.1 39.1 EBIDTA margins % 20.6 17.3 PAT margins % 12.0 11.8 The combined entity will be called Arcelor-Mittal and will have a 10% share of the global steel capacity of 1,132 m tonnes (MT) per year. As reported, while the Mittal family will hold a 43.4% stake in the new entity, Arcelor shareholders will own 50.5% stake. Lakshmi Mittal and Joseph Kinsch (Arcelor's current Chairman) will jointly head the new corporation, which will have combined revenues of around US$ 69 bn. As indicated in a Mittal Steel presentation, the combine, with a geographical footprint in 27 countries (with 61 manufacturing locations), will have several strategic advantages like: Leadership position in high-end segments in North America, with strong R&D capabilities; Operations in high-growth economies of Asia and South America with low-cost profitable assets and local operations expertise in numerous emerging markets; Access to raw materials and upstream integration Well-balanced portfolio exposed to the whole spectrum of steel products So, what are the implications for Indian steelmakers? Not much, really! While the Arcelor-Mittal combine will hold around 10% of the global steel manufacturing capacity, it is still not sufficient to create any monopolistic kind of a situation in the steel

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