Steel Giants Plan to Merge
Dec 26, 2006
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In late June, when the board of steel giant Arcelor SA (Luxembourg) unanimously recommended a merger proposal from Mittal Steel N.V., it was the climactic twist in a 6-month merger drama that started at the beginning of 2006. In January, Mittal made a takeover offer to Arcelor, eager to make the combined companies into the world's first 100-million-ton plus steel producer. Arcelor rebuffed the offer.

In March, Arcelor made its own acquisition, acquiring the shares of Canadian steel supplier Dofasco. Meanwhile, Mittal went about getting approvals for the merger, regardless, and received U.S. antitrust clearance for a merger with Arcelor – but that was conditioned on the sale of Arcelor's stake in Dofasco.

Arcelor had other plans, and wasn't giving Mittal the time of day. Mittal complained in early May that its attempts to initiate a dialog with Arcelor Chairman Joseph Kinsch had been rebuffed. Still, on May 19th, Mittal made an improved offer to Arcelor. Arcelor's board met on Sunday (May 21), and Kinsch said the new offer seemed to address some of the shortcomings Arcelor had seen in the original offer, and a study of the new offer was ordered.

But Arcelor had other plans, as became clear at the end of May when it said it would merge with Moscow-based steel company Severstal. Mittal called the potential Arcelor/Severstal merger a "second-class combination" and would deny shareholders a premium.

A month later, everything changed. Mittal submitted further revisions to its merger offer and Arcelor issued a statement recommending the offer, calling it a "substantial improvement compared to Mittal Steel’s preceding offer announced on 19 May."

The new Arcelor-Mittal
The new steel company that would result from the merger, Arcelor-Mittal, will be headquartered in Luxembourg, according to Mittal's release on the agreement. Arcelor-Mittal will be listed in New York, Paris, Madrid, Amsterdam, Brussels, and Luxembourg. The industrial and corporate governance model will be based on Arcelor’s model, Arcelor said.

The two companies had still not officially tied the knot as of the end of 2006—the merger is planned for 2007—but they are using the name Arcelor-Mittal and even announced the joint acquisition of Noble International, Ltd., North America's largest producer of laser-welded steel products.

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