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Published by:
IBS Research Center (2006)
18 pages
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The Luxembourg based Arbed (later to became Arcelor) was the number one steel company in Europe and the third largest in the world. Until 1974, the steel industry was the major contributor to the gross domestic product (GDP) of Luxembourg and was also the major employer. In 2002, Arbed merged with Usinor (Spain) and Aceralia (France) to form Arcelor. By 2005, Arcelor became the world''s number one steel company with a global turnover of 32.6 billion euros. The Luxembourg government was a major shareholder with 5.6% share in Arcelor. In January 2006, Mittal Steels, the world''s number two steel company, offered to buy Arcelor for 18.6 billion euros. Together Arcelor and Mittal were expected to account for 10% of the global steel production and a market capitalisation close to US$40 billion. Mittal gave an assurance that it would protect European jobs and maintain the new headquarters of the combined Mittal-Arcelor in Luxembourg itself. But Mittal was criticised by the Belgium, France and Luxembourg governments. India and the European Union criticised politicians of these countries for interfering as it was against the spirit of free competition and globalisation. The Luxembourg government was in a dilemma, should it approve the takeover? The case highlights the importance of a company for the growth and development of a country. The case also explains the effect of a cross border merger on the foreign relations with different countries. The case highlights how the government, being a shareholder in a company, can affect the company''s decisions.


Arcelor; Luxembourg; Mittal Steels; Iron and steel industry; Arbed; Restructuring; Acquisition; Hostile bid; Aceralia; Usinor
Turnover, EUR32.6 billion
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