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Abstract

On 26 January 2006, Laxmi Niwas Mittal''s (LNM) Chairman and Chief Executive Officer of Mittal Steel, the world''s largest steel company, made a bid for Arcelor SA, (the world''s second largest steel company). In an era, when consolidations and acquisitions were common practices in the industry, Mittal Steel''s new move was expected to help it in consolidating its presence more aggressively. The proposed acquisition price of US$23 billion, was the biggest in the global steel industry. The proposal was, however, strongly opposed by Arcelor''s management and the whole of Europe was divided on the issue. The analogy was, that since Mittal Steel produced cologne, Arcelor, being the producer of perfumes only, claimed that the merger between the two companies was not possible. Even the French Government and Luxembourg Government strongly opposed Mittal Steel''s move. The concept of corporate xenophobia followed the move. While LNM defended the move from the point of view of the benefit of the global steel industry and identified in it the geographic, commercial, manufacturing and operational synergies, Arcelor denied it. The French and Luxembourg governments, moreover, accused LNM of poor management style and were afraid that the acquisition would result in job losses. The case study offers scope for discussing the rationale of the acquisition in the recent global trends, the value chain of the industry and how Mittal Steel plans to leverage it. The case study also allows the discussion of how Mittal Steel can leverage the acquisition by strengthening its position across the globe.
Location:
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Other setting(s):
2006

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Abstract

On 26 January 2006, Laxmi Niwas Mittal''s (LNM) Chairman and Chief Executive Officer of Mittal Steel, the world''s largest steel company, made a bid for Arcelor SA, (the world''s second largest steel company). In an era, when consolidations and acquisitions were common practices in the industry, Mittal Steel''s new move was expected to help it in consolidating its presence more aggressively. The proposed acquisition price of US$23 billion, was the biggest in the global steel industry. The proposal was, however, strongly opposed by Arcelor''s management and the whole of Europe was divided on the issue. The analogy was, that since Mittal Steel produced cologne, Arcelor, being the producer of perfumes only, claimed that the merger between the two companies was not possible. Even the French Government and Luxembourg Government strongly opposed Mittal Steel''s move. The concept of corporate xenophobia followed the move. While LNM defended the move from the point of view of the benefit of the global steel industry and identified in it the geographic, commercial, manufacturing and operational synergies, Arcelor denied it. The French and Luxembourg governments, moreover, accused LNM of poor management style and were afraid that the acquisition would result in job losses. The case study offers scope for discussing the rationale of the acquisition in the recent global trends, the value chain of the industry and how Mittal Steel plans to leverage it. The case study also allows the discussion of how Mittal Steel can leverage the acquisition by strengthening its position across the globe.

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Location:
Industry:
Other setting(s):
2006

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