The morning-after feeling started late in the afternoon for steel tycoon Lakshmi Mittal and all his staff working out of two floors in the swish, if impersonal, rented offices of his company in Berkeley Square, Mayfair.
At lunchtime on Friday, they received word from Luxembourg that European steel champion Arcelor’s shareholders had voted by an overwhelming majority to reject the proposed merger with Russian oligarch Alexei Mordashov’s Severstal. The way was finally clear for Mittal Steel, the world’s number one producer, to merge with Arcelor, the world’s number two.
Right on cue, the Mittal Steel brass ordered champagne to be cracked open. Everyone, from receptionist to regional vice-president, was invited.
After five months of playing hardball in European boardrooms and chancelleries, a relaxed and expansive Lakshmi Mittal met Rashmee Roshan Lall in London for his first interview with the print media after the deal he had been avidly pursuing for months was finally stitched up. Excerpts:
What’s the morning-after feeling like? Euphoria? Disbelief that you actually won through? A calm sense of satisfaction? A told-you-so sense of smugness?
You know, it was the most difficult task to get more than 50% of the outstanding capital of the company (Arcelor) to vote down the (Severstal) transaction. This, in a company where more than 30% of the shareholders have never attended a meeting.
But when Arcelor announced the Severstal transaction, shareholders didn’t like it; they didn’t get to know the rationale, the industrial logic or why the merger makes sense to the steel industry. I have been meeting shareholders and explaining the logic.
And you can see 60% (of shareholder capital) present either directly or through proxies voted against the Severstal transaction; 95% shareholders present voted against. But I was absolutely delighted that we secured the recommendation of the Arcelor board of directors for our offer.
I have said right from the beginning of this transaction that a recommended merger is in the interests of all stakeholders. The key was having the opportunity to sit down with Arcelor, explain more about Mittal Steel, our strategy and the industrial logic of our proposal.
When this occurred it became clear that we were on common ground and the value of the proposal became obvious. It has been a fantastic achievement by all involved although this is not a time to rest on our laurels and congratulate ourselves on what has been achieved.
We now have to conclude the deal and then focus on integrating the two companies, ultimately creating a true global steel champion of we can all be proud. Only when we have reached this stage will I truly reflect on our achievements but certainly I am very satisfied to have reached this stage.
Now that Arcelor shareholders have voted against the Severstal merger, would you agree that this is only now an arranged marriage rather than a forced one? Surely as an Indian, you incline more to arranged marriages and not forced ones?
Yes, this is now an arranged marriage. But I’ve been persuading the bride for five months, it’s been a five-month courtship. That’s long enough, I think. Some people get married within five days.
What’s your abiding memory of the last five months? What was your high point and when did you reach it? What was your low point; when did that happen and what were the circumstances?
I have worked on many deals in my lifetime, within the steel industry and this has definitely been one of the most complex and challenging deals that we have ever undertaken. The low point was the day they announced the proposed transaction with Severstal.
However, very quickly, shareholders mobilised and made their dissatisfaction very clear with the way in which the transaction was being presented. This was the turning point in terms of getting the recommendation from the Arcelor board, which clearly was the high point.
At what point did you finally realise the deal was in the bag? Who said what to you that made you finally think the merger would go through?
Till today (Friday) the deal was not in the bag. Till today, we had only received a recommendation from the board of Arcelor and that was clearly a big achievement but shareholders of Arcelor still needed to tender into the offer, which is open until July 13.
We still needed to urge shareholders to tender their shares and benefit from the 82% premium we are offering. But now, it is a done deal. On July 12, I expect Arcelor shareholders to tender their shares. Today (Friday), we have crossed the biggest hurdle in the history of Mittal Steel.
What do you as a family feel about the fact that your stake in the new company is under 50%? Do you think you might want to bump up your equity in the future and acquire a bigger stake in Arcelor-Mittal?
The deal is about creating an industry leader that has the scope, scale and financial strength to really shape the future of the steel industry.
We are very happy with our position as a 43% shareholder in such a company. I have always championed the need for consolidation in order to create a truly sustainable industry and this merger marks a step change in this process.
You have publicly said that you were never personally at the receiving end of some of the subliminally racist, culturally insular remarks flying around after you launched your takeover bid on January 27. How then do you explain the fact that you went to India and spoke at some length to express your hurt at being victimised for your Indian origins?
Various things were said and I am of the opinion that people were talking from emotion when we initially launched our offer.
I am a global businessman, from Indian roots of which I am very proud and our company has as much right as any other to make an offer for another company in a global industry. We have seen that this view has now been accepted and I prefer to look forward rather than comment on issues that have passed.
In your view, what role, if any, did the Indian government’s support for your bid play in the overall mood music as you fought your big fight?
It was pleasing that the Indian government spoke out in favour of the merger and we were very grateful for their support. The point they made was that in today’s landscape, countries should be embracing globalisation rather than shying away from it.
From India’s perspective they have a lot of growing companies with global ambitions and I think they were concerned as to what this might signify more broadly for Indian companies wanting to expand into Europe.
What will Arcelor-Mittal’s focus be for Asia and more particularly for India? What will the new merged company’s strategy be for India?
The developing markets of Asia will be of great significance for the combined company going forward as we look to take advantage of the forecast per capita steel consumption increases in these countries. Both Mittal Steel and Arcelor already have strategic partnerships in China and we will look to further expand our presence in this market.
In India, we have announced our intention to build a 12-million-tonne greenfield steelmaking and mining facility in the state of Jharkhand. This project is a significant investment and one that will play a major role in the future success of Arcelor Mittal.
Are you likely to buy a home sometime soon in Luxembourg, considering that’s where the new company will be headquartered?
I am sure I will spend more time in Luxembourg in the future but I intend to keep my home in London.
Has the Indian government formally congratulated you on your triumph? If so, who said what?
The Indian government has been very supportive in this transaction. I don’t think they were looking at it only in terms of Mittal Steel and Arcelor, I believe they were thinking what this would mean for Indian companies more generally wanting to expand abroad. I am very grateful for the support that we received from them.
You’ve managed to push through the biggest consolidation in the history of the steel industry. But what of the future? Do you see this process accelerating, with Arcelor-Mittal merging lots of other steel companies in other parts of the world, like Tata Steel in India?
Further consolidation is necessary and I think this merger could well prove to be a catalyst for further mergers and acquisitions within the industry. Over the next 10 years we could well see a number of companies forming alliances which would lead to a handful of global producers each with capacities in the region of 150-200 million tones.
The result of global restructuring will lead to a healthier steel industry, capable of generating better returns through the business cycle.
There is a view that your successes are the result of being an Indian outside India and you could never have done this had you stayed on in India.
Oh no, when I left India the situation was very different. Now, it is very different. Today every Indian businessman, every young businessman, has the same opportunities as me. India is open, the government encourages businessmen to go global. Indian businessmen can go global whether they live in India or not. It’s a small world now.