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Mergers and Acquisitions: Hostile Mergers (Case study ArcelorMittal ) - Essay Example

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Mergers and Acquisitions: Hostile Mergers (Case study ArcelorMittal )

There are different types of merger and acquisition can find in the business world, among which the takeover of Arcelor by Mittal steel Company is considered as hostile merger. Hostile merger is that kind of merger, where the management of the one company is forcefully acquires the other company by replacing its management and other operation sectors. In this case the Mittal Steel may do not forced Arcelor to change its management or operation system, but they pay more than the actual share price of Arcelor. The offer made by Lakshmi Mittal is the highest bid made in the steel industry. The offer explained four Mittal shares with 35.25 euro will be exchanged for every five shares of Arcelor. As a result the value of Arcelor’s share valued as 28.21 euro, which implicates that it will involves 27% premium over the closing price on the stock market from the previous day. This brings the conclusion that the merger between Mittal and Arcelor companies is an example of Hostile merger. Case study- ArcelorMittal Mittal Steel Company and Arcelor In the year1978, the steel company was formed as “Ispat International” by the father of Lakshmi Mittal. Different disagreements between the father and son made a separation in the year of 1995. It’s headquartered in Rotterdam, Netherlands. The company grow high within few years by different investment and acquisition throughout the world. Among which, the most controversial merger was with Arcelor. Before the acquisition , Arcelor was the largest steel producer in terms of turnover and second largest in terms of steel output, whereas Mittal Stand first in terms of output. The CEO of Arcelor is Guy Dolle, and it’s headquarter is situated in Luxembourg City (Kumar, 2012). 1. Strategy In recent years few industrial mergers has captured the imagination of the business world like Arcelor and Mittal Steel. These two companies are the largest complementary company in terms of steel production (Rao and Sivaramakrishna, 2009, p. 3). In the year 2006 Mittal Steel asked the shareholders of Arcelor to create the world’s first steel producer , which will produce steel more than 100 million tonne plus. Mittal offered $22.7 billion to the share holders of Arcelor as a deal value. This will be split as 75% of Mittal’s shares and 25% in terms of cash (Zabihollah, 2011, p. 72). However soon it creates a big controversy. Now the question is come up why Mittal Steel chooses and offers Arcelor for their acquisition. It offers several answers like- Arcelor is an attractive target. Mittal had only 34% merger revenue from Europe, whereas Arcelor had 71%, which is near about the double amount which Mittal had. In terms of production unit of steel, Archelor was the strongest competitors for Mittal steel (Nancy, 1999, p. 4) Why the changes implemented Both the companies wanted to achieve the number one position in the steel industry, which is not possible, if they try it individually. These two companies want to achieve the economy of scale. However there are different factors are come as obstacle in terms of growth for these companies. Competitors are one of the main factors. Abolishment of competitors will help them to achieve the economy of scale. According to the experts from the year 2006 there was a high demand for the steel industry. However it will be not possible in one way growth for the companies, changes were necessary for them. In terms of volume as well as revenue, both the companies were very attractive to each other. They ...Show more

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Mergers and Acquisitions: Hostile Mergers (Case study ArcelorMittal) Table of Contents Introduction 3 Case study- ArcelorMittal 3 Mittal Steel Company and Arcelor 3 1.Strategy 4 Why the changes implemented 4 2.Regulatory 6 3.Valuation 7 4.Financing 7 5.Defence tactics 8 6…
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