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Ispat International to Acquire LNM Holdings, Will Merge with ISG
Oct 25, 2004
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Ispat International N.V. announced that it has agreed to acquire LNM Holdings N.V. Following completion of the transaction, the company will be renamed Mittal Steel Company N.V. Simultaneously, Ispat International and International Steel Group Inc. (ISG) announced that their boards of directors have unanimously approved a definitive agreement under which Ispat International and ISG will merge. According to Ispat, the combined Mittal Steel will be the largest steel company in the world and will be listed on the New York Stock Exchange(NYSE) and Euronext Amsterdam.

LNM Holdings is said to be one of the world's largest and most profitable steel companies and also has substantial mining assets. Revenues were U.S. $9.9 billion and operating income was $3.2 billion in the first nine months of 2004. The company has annual total raw steel production capacity of more than 32 million tons and owns significant mining assets, annually producing approximately 18 million metric tons of iron ore, 13 million metric tons of coke, and 12 million metric tons of coal. LNM Holdings believes it has opportunities to achieve additional growth and cost reductions, particularly at recent acquisitions. For 2004, the company expects steel shipments of approximately 26 million tons and revenues of approximately $14.5 billion.

Under the terms of the agreement with LNM Holdings, Ispat International will issue 525 million new shares, valued at $13.3 billion at Friday's closing share price on the NYSE, to the shareholder of LNM Holdings. The new shares will comprise approximately 140 million class A shares and approximately 385 million class B shares, which is in the same proportion as the Ispat International shares currently held by LNM Holdings' controlling shareholder.

Under the terms of the agreement with ISG, ISG shareholders will receive $21.00 per share in cash and a number of Mittal Steel shares equal to $21.00 divided by the average closing price of Mittal Steel for the 20 trading days prior to closing, up to a maximum of 0.6087 shares and a minimum of 0.4793 shares. The value in the merger would be $42.00 per ISG share, or $4.5 billion in the aggregate if the average price of Mittal Steel shares for the 20 trading days prior to the merger is between $34.50 and $43.81 per share. ISG shareholders will be able to elect between cash and Mittal Steel shares, subject to pro ration such that 50 percent of the total consideration will be in cash and 50 percent will be in Mittal Steel shares. The closing prices of Ispat International and ISG shares on Friday, Oct. 22, 2004 on the NYSE were $25.34 and $29.68, respectively.

The companies have signed a Letter of Agreement with the United Steelworkers of America and the Independent Steelworkers Union.

Upon completion of both transactions, Mittal Steel will be considered the largest steel company in the world:

  • Mittal Steel will have operations in 14 countries on four continents and 165,000 employees
  • For the 9 months ended Sept. 30, 2004, Mittal Steel had pro forma revenues of $22.5 billion, pro forma operating income of $4.9 billion, and pro forma total steel shipments of 43 million tons.
  • For 2004, Mittal Steel expects pro forma revenues of more than $31.5 billion, pro forma operating income of $6.8-7.0 billion, pro forma total steel shipments of approximately 57 million tons, pro forma net debt of $3.2 billion, and pro forma earnings per share of $7.20-7.40, based on approximately 704 million shares of Mittal Steel outstanding.

    Lakshmi N. Mittal will be chairman and CEO of Mittal Steel. Wilbur L. Ross, chairman of ISG, will become a board member of Mittal Steel. Aditya Mittal will be president, group chief financial officer and a Board member. Malay Mukherjee will be chief operating officer. Rodney Mott, president and CEO of ISG, will become CEO of Mittal Steel's combined U.S. operations.

    "These transactions dramatically change the landscape of the global steel industry," Mr. Lakshmi N. Mittal said in a statement. "We are bringing together Ispat International, LNM Holdings, and ISG, one of the largest integrated steel producers in North America, creating a global powerhouse. In recent years, the steel industry has been characterized by predominantly regional consolidation. This combination represents a significant step forward in the globalization of the industry."

    He continued: "The combined company will have excellent positions in raw materials, particularly coal, coke, and iron ore, as well as strong positions in key end sectors. This combination also provides Mittal Steel with a more significant presence in important industrialized economies such as those in North America and Europe and in economies that are expected to experience above average growth in steel consumption, including Asia and Africa."

    Mittal Steel's strategy will be to strengthen its position as a low-cost, high-quality steel producer and by "continuing to play an integral role in a globally diverse steel industry." The company believes it is well positioned in key areas will experience significant growth in steel consumption. The combined company will serve all the major steel consuming sectors, including the automotive, appliance, machinery, and construction sectors.

    Ispat International operates in 6 countries in North America and Western Europe, including the U.S. through Ispat Inland Inc. Ispat International has annual total raw steel production capacity of more than 18 million tons and is targeting 2004 revenues of approximately $8.3 billion.

    LNM Holdings operates in 8 countries in Europe, Africa, and Asia. It has annual total raw steel production capacity of more than 32 million tons and is targeting 2004 revenues of approximately $14.5 billion.

    ISG is one of the largest integrated steel producers in North America and among the top 10 globally. Since being formed in April 2002, it has acquired the steel making assets of LTV, Acme Steel, Bethlehem Steel, Weirton Steel, and Georgetown. ISG has annual total raw steel production capacity of approximately 20 million tons and is targeting 2004 revenues of approximately $9 billion.

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