23 March, 2006

Finesse hostile bid

Have you heard of hostile bid offer for Arcelor steel from Mittal steel? I am excited to follow the deal right from its start. I should admit that I am self-proclaimed fan of Lakshmi Mittal. The worth of the deal is US$ 22,700, 000,000. Any shareholder of the Arcelor can sell his share to Mittals at the rates fixed by his managing sleuths. Lakshmi aims to garner 55-60 percent share on Arcelor within three months.
 
Surprising fact is Mittal steel free floating shares on market is just 12%. Remaining 88% share is owned by lakshmi and his family. Net worth of Mittal steel is quoted to be above US$ 25,000,000,000 (Have you noticed the hostile bid is nearly 90% of Mittal steel's net worth). The fact is Mittal steels had never been a green field corporation (like our RPG group's erstwhile business style). Someway or other, they buy a sick industry. send their god-sent-angel managers to those industry and show a turn-around story to the world.
 
The finance deals of the Mittal steel should be an interesting chapter for management students in finance. I read about "virgin airways" Richard Branson woes with banking and finance earlier. Branson business would have been declared insolvent by his banker because of his financial crunches in early years in business. In Mittal's case, managing to hold 88% share in 25 billion dollar company would have cost him dearer.
 
Arcelor on the other hand has just 8% shares with the promoters. They scaled up the operation by rising money from capital markets for all along. Now the sparse share pattern had become their enemy. Anyone with money power can buy them through hostile bids route. Referring back annuls of Indian business history, we could wonder about Ratan Tata's concern to increase Tata sons share percentage in their entire business ranges. He had brought promoters share from less than 8% to 22% by re-purchasing. Capital markets offers easy finance option for the companies who want to scale up operations. But you tend to lose the ownership over your dear company when you accept more shareholders.
 
Mittal -Arcelor bid attracted lot of political dramas around it. Arcelor being french company lobbies around the world to stop this hostile bid attempt. French PM chose to talk on this issue with Indian PM Manmohan singh on his last visit. Mittal gets labour party and Tony Blair's support in UK and lobbies hard to beat french goverment attempts. French sting on their attack is ' how can we allow non-european company to swallow europe's steel giant?'. Mittal counter-attacks saying Mittal steel is registered in scandinavian country. We should thank Guy Dolle, CEO of Arcelor to give us a chance to see the interesting business acquisition of our generation. Dolle is said to have rejected Mittal's idea of smooth merging of two companies in a dinner. Next day after the rejection of offer, infuriated Lakshmi Mittal announced in public about his hostile bid for Arcelor.
 
 


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2 comments:

icyblue said...

Interesting!

Nirek said...

@icy.. thanx yaar.
howz life there in US of A?