Mittal's $4.5b buy may trigger steel mergers<\/p>\n
Stuart Wallace, Bloomnberg\/London<\/p>\n
Lakshmi Mittal's US$4.5 billion acquisition of International
\nSteel Group Inc. may prompt a spree of deals as the steel
\nindustry consolidates to cut costs.<\/p>\n
Indian-born Mittal, 54, started out with a steel mill in
\nIndonesia in 1976. By April of next year, the London-based
\nentrepreneur will have bought Wilbur Ross's ISG to create the
\nworld's biggest steelmaker and lead a company with plants in 14
\nnations. Mittal Steel Co. NV will turn out 40 percent more steel
\nthan Luxembourg-based Arcelor SA, currently the largest producer.<\/p>\n
\"This finally takes consolidation globally,\" said Lewis
\nJohnson, an analyst at T. Rowe Price in Baltimore, which managed
\nabout $207 billion as of June 30, including International Steel
\nshares. \"What's next for companies like Arcelor, what will the
\nRussian companies do and is consolidation in the U.S. over? I
\nthink it's not. There is much more to come here.\"<\/p>\n
With assets from Algeria to Kazakhstan and from Maryland to
\nMexico, Mittal's company will sell steel on four continents. Its
\nsize will give it greater clout in dealing with the mining
\ncompanies that supply raw materials and with carmakers and other
\ncustomers that buy its products. The three biggest steelmakers
\ncontrol about a 10th of the market, while the top three iron-ore
\nproducers control three- quarters of theirs.<\/p>\n
\"The steel industry has been squeezed for years and years by
\nthe iron-ore industry,\" said Peter Fish, managing director of
\nU.K.- based industry consultant MEPS (International) Ltd. \"At the
\nother end, it has been squeezed by the auto industry.\"<\/p>\n
Ispat shares rose for a second day, adding 2.20 euros, or 9.3
\npercent, to 25.95 euros ($33.22) at 9:12 a.m. in Amsterdam. Corus
\nGroup Plc shares rose 3.1 percent to 50.5 pence in London. U.S.
\nsteelmakers' shares rose yesterday as investors speculated
\nfurther combinations are likely. Nucor Corp. rose 3.8 percent,
\nU.S. Steel Corp. 6.7 percent and AK Steel 8.2 percent.<\/p>\n
Ross, who will be on the board of the enlarged company, said
\nhe met Mittal for the first time in August.<\/p>\n
\"It was love at first sight,\" Ross said in an interview in New
\nYork. \"We found that we both thought alike about things. We're
\nboth entrepreneurial companies, so we felt there wouldn't be any
\nculture clash.\"<\/p>\n
Ross, through his leveraged buyout firm W.L. Ross & Co.,
\nfounded International Steel in 2002 by buying the shuttered
\nassets of LTV Corp. out of bankruptcy. Mittal also built his
\ncompany by buying unprofitable steelmakers.<\/p>\n
Mittal was born in the northwest Indian desert state of
\nRajasthan and grew up in the eastern city of Calcutta. He worked
\nfor his father's steel company while earning a degree in commerce
\nfrom St. Xavier's College.<\/p>\n
His brothers are also steelmakers, running India's Ispat
\nIndustries Ltd. Ispat means steel in sanskrit.<\/p>\n
\"It's a matter of pride that my brother now heads the biggest
\nsteel company in the world,\" Pramod Mittal, chairman of Ispat
\nIndustries, said in an interview. \"This acquisition will help the
\nsteel industry consolidate further.\"<\/p>\n
This year, Mittal, who is married with two children, bought a
\n70 million punds ($129 million) home close to London's Kensington
\nPalace from Bernie Ecclestone, who co-owns the rights to Formula
\nOne. Mittal also owns The Summer Palace, his 12-bedroom home in
\nBishops Avenue, North London, a street commonly known as
\nmillionaires' row, where King Fahd of Saudi Arabia and the Sultan
\nof Brunei also have residences.<\/p>\n
The five-day wedding of Mittal's daughter in June, which
\nincluded a private performance by pop star Kylie Minogue and a
\nreception at Versailles, cost 37 million pounds, according to The
\nTimes of London. Mittal is the U.K.'s fifth-richest person, with
\na fortune of 3.5 billion pounds, according to The Sunday Times
\nnewspaper.<\/p>\n
The U.K. opposition Conservative Party in February 2002 called
\nfor a probe into a 125,000-pound donation Mittal had made the
\nyear before to the governing Labor Party, which denied any
\nwrongdoing.<\/p>\n
Mittal, who practices yoga for about an hour each day, started
\nto expand his LNM Group, the company that controls all his
\nassets, in 1989, when it bought a business in Trinidad.<\/p>\n
\"I have been propagating that the steel industry should be
\nconsolidated for many years,\" Mittal said in an interview in New
\nYork yesterday. \"Today, we are the most globalized steel
\ncorporation in the world.\"<\/p>\n
Mittal mostly buys unprofitable steel plants and then invests
\nin new facilities, boosts production and improves management. In
\nthe 1990s, he made acquisitions in Mexico, Canada, the U.S.,
\nIreland, Germany, France and Kazakhstan.<\/p>\n
\"Mittal specializes in turning around assets that others had
\nfound difficult,\" said Chris Beauman, a senior adviser at the
\nEuropean Bank for Reconstruction and Development.<\/p>\n
Beauman's bank lent Mittal money to buy plants in Kazakhstan
\nand Romania. In 1997, most of the steel assets were placed under
\nthe control of Ispat International NV, based in Rotterdam, the
\nNetherlands, and about $775 million worth of the company's shares
\nsold in a public offering. Mittal and his family still retain a
\n77 percent stake in Ispat International.<\/p>\n
Mittal placed some assets, including those in Kazakhstan,
\nunder the control of his privately held LNM Holdings NV, which is
\nbased in the Dutch Antilles. Since 2001, LNM has added assets in
\nRomania, Algeria, South Africa, the Czech Republic and Poland.<\/p>\n
Mittal will combine Ispat International and LNM Holdings
\nbefore buying International Steel.<\/p>\n
In Romania, he bought the state-owned Siddex steel mills with
\n27,000 employees. Mittal put his own managers in charge and cut
\nthe workforce to about 19,000, said Victor Ciutacu, a former
\nadviser to the privatization minister.<\/p>\n
\"He had a strong hand in running the company. The company was
\nin a poor financial condition,\" Ciutacu said. \"Now things are
\nlooking much better and wages have improved.\"<\/p>\n
To cut costs, Mittal uses mini-mills, or small steel mills
\nthat are more efficient than traditional blast furnaces. Many of
\nthese employ the DRI method, or direct reduced iron, to produce
\nraw steel rather than relying on scrap metal. Ispat is now the
\nworld's largest DRI producer.<\/p>\n
Mittal Steel will probably add more production capacity over
\nthe next several years, particularly in Indian and China, Mittal
\nsaid. The new company will ship about 57 million metric tons of
\nsteel this year, or about 6 percent of the world's total output.<\/p>\n
Mittal already had set his sights on becoming the No. 1
\nsteelmaker when he bought the Inland Steel Co. of the U.S. for
\n$1.43 billion in 1998. The acquisition made him the world's
\nfourth-largest producer.<\/p>",
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