Arcelor-Mittal Merger

Report
“A Union of Titans”
 Background

Mittal Steel
Mittal Steel is the world's largest and most global steel company, with shipments
of 49.2 million tons and revenues of over $28.1 billion in 2005. They own steel-
making facilities in 16 countries, spanning four continents. They employ 224,000
people spanning 49 different nationalities. Their shares are listed on the New
York and Amsterdam stock exchanges.

Mittal Steel has set the pace for the consolidation and globalization of the world
steel industry. They have taken on a range of acquisitions, many of them
formerly public sector-owned companies, and made successes of them. In the
process they have spread best practice and modern production techniques
throughout their plants. Their capital investment programme is unmatched in the
industry.

Their 5000 strong customer base, spanning 150 countries, includes household
names in the automotive, engineering and appliance sectors. A force in every
segment of the steel market, Mittal Steel produces a broad range of high-quality
finished and semi-finished products for the flat and long products markets.

Mittal Steel is among the most efficient steel producers in the world. They
encompass all aspects of modern steelmaking, combining both integrated and
mini-mill facilities and producing much of the iron ore and coking coal used in
their furnaces. They are also among the most advanced steel makers, operating
a range of modern technologies. They have pioneered the use of direct reduced
iron (DRI) as a raw material source and are now the world’s biggest producer of
DRI. With two technical research facilities, their product development teams are
ready to meet the needs of the most demanding customers.

Board of Directors

Lakshmi N. Mittal Chairman of the Board of Directors and Chief Executive

Officer
Aditya Mittal Member of the Board of Directors and President and Chief
Financial Officer
Wilbur L. Ross Member of the Board of Directors
Narayanan Vaghul Member of the Board of Directors
Ambassador Andrés Member of the Board of Directors
Rozental
René Lopez Member of the Board of Directors
Muni Krishna T. Reddy Member of the Board of Directors
Lewis B. Kaden Member of the Board of Directors
Vanisha Mittal Bhatia Member of the Board of Directors
Lakshmi N. Mittal – Profile

Mr. Lakshmi N. Mittal is the Chairman and CEO of Mittal Steel Company. He
founded the company in 1976 and has been responsible for the strategic
direction and development of its businesses. Mittal Steel is the only truly global
steel producer in the world with operations on 14 countries, spanning 4
continents. Mr. Mittal’s ability to guide the company in its identification,
acquisition and turnaround of steel assets has led to its emergence as one of the
world’s fastest growing steel producers. Mr. Mittal began his career working in
the family’s steelmaking business in India, and has over 30 years of experience
working in steel and related industries. Over the years, Mr. Mittal has also
championed the development of integrated mini-mills and the use of Direct
Reduced Iron or “DRI” as a scrap substitute for steelmaking and led the
consolidation process of the global steel industry. Other related activities of Mittal
Steel include shipping, power generation and distribution, and mining.

Following the transaction combining Ispat International and LNM Holdings to

form Mittal Steel in December 2004, together with the simultaneous
announcement of the acquisition of International Steel Group in the US to form
the world’s largest steel producer, Mr. Mittal was awarded Fortune magazines
“European Businessman of the Year 2004”. Previously, he was awarded
“Steelmaker of the Year” in 1996 by New Steel in the USA, and the “Willy Korf
Steel Vision Award” in June 1998, for outstanding vision, entrepreneurship,
leadership and success in global steel development from American Metal Market
and PaineWeber’s World Steel Dynamics.

Mr. Mittal is an active philanthropist and a member of various trusts. Mittal Steel
is a significant contributor to local community and welfare activities for employees
in countries where the Group operates. Mr. Mittal is a member of the Foreign
Investment Council in Kazakhstan, the International Investment Council in South
Africa, the World Economic Forum’s International Business Council and the
International Iron and Steel Institute’s Executive Committee. He is a Director of
ICICI Bank Limited and is on the Advisory Board of the Kellogg School of
Management in the U.S.. He was born in Sadulpur in Rajasthan, India on June
15, 1950, and graduated from St. Xavier’s College in Calcutta where he received
a Bachelor of Commerce degree. He is married to Usha Mittal, and has a son,
Aditya Mittal and a daughter, Vanisha Mittal.
Mittal Steel Growth Timeline

Year Acquired Description

1989 Iron & Steel A modern technologically advanced Steel Complex.

Company Of Renamed as Caribbean Ispat.
Trinidad & Tobago
1992 Sibalsa Mexico’s Third Largest Steel Producer. Renamed as Ispat
Mexicana.

1994 Sidbec-Dosco Canada’s number four steel maker is bought from the
Government of Quebec and renamed Ispat Sidbec.

1995 Hamburger Germany’s fourth largest producer of wire rod, renowned

Stalwerke for its mini-mill expertise and renamed as Ispat Hamburger
Stahlwerke.

The Group buys a 5.5 million tons pa blast furnace steel

Karmet plant in Kazakhstan, renamed Ispat Karmet.

1998 Inland Steel Ispat International buys America’s fourth largest

Company steelmaker, Inland Steel Company and renames it Ispat
Inland.

1999 Unimétal Ispat International buys the French company, Unimetal

Group, including Trefileurope and SMR, from Usinor.

2001 ALFASID LNM Holdings buys 70 per cent of ALFASID from the
Algerian government and renames it Ispat Annaba.

SIDEX LNM Holdings acquires SIDEX, an integrated steelworks in

Galati, being privatized by the Romanian government.
Renames it Ispat Sidex.
2002 Business assistance LNM Holdings signs a business assistance agreement with
agreement signed the South African steel producer, Iscor. LNM subsequently
with Iscor takes control of Iscor in June 2004. Ispat Iscor has now
been renamed Mittal Steel South Africa.

2003 Nova Hut LNM Holdings signs an agreement to buy Nova Hut, the
largest steel producer in the Czech Republic, from the
Czech government. The acquisition, at an all-in cost of
$905 million, takes effect in January 2003 and the
company is renamed Ispat Nova Hut.
2004 Polski Huty Stali LNM Holdings buys a controlling holding in Poland’s
leading steel producer, Polskie Huty Stali, and renames it
Ispat Polska Stal (IPS). The company boasts a capacity of
over 6.5 million tons a year but is close to bankruptcy at
the time of acquisition.

BH Steel LNM Holdings buys Bosnia’s BH Steel, committing itself to

the biggest ever investment in Bosnia by a foreign
company.

Macedonian facilities LNM adds to its downstream activities in the Balkans with
from Balkan Steel the acquisition of hot and cold rolling mills in Skopje,
Macedonia. The two mills, dormant for two years, are
renamed Ispat Skopje.

Creation Of Mittal LNM Holdings and Ispat International announce their

Steel and Proposed merger - to form Mittal Steel. At the same time, Mittal Steel
Acquisition Of announces an agreed takeover of International Steel
International Steel. Group of the US in a cash and shares deal worth $4.5
billion. Once the proposed acquisition is completed, it will
create the world’s largest steel maker with a stock market
worth of around $21 billion and a combined capacity of 70
million tons of steel a year. The enlarged Mittal Steel will
span the globe with around 30 per cent of its assets in
North America, 30 per cent in Europe and the remaining
40 per cent split between Asia and Africa. Chairman
Lakshmi Mittal declares his intention to make the Group
‘the lowest cost steel producer in every market.’

2005 Acquisition of stake Mittal Steel announces a share purchase agreement to

in Hunan Valin acquire 36.67 per cent of Hunan Valin Steel Tube & Wire,
one of China’s top ten steelmakers with annual capacity of
8.5 million tonnes. The move marks Mittal Steel’s entry
into the Chinese steel industry.

ISG Acquisition The acquisition of ISG is completed and the company is

Completed merged with Mittal Steel’s existing US operation, Ispat
Inland, and subsequently re-named Mittal Steel USA.

Mittal Steel Europe Mittal Steel restructures its European business, merging its
Created western European operations with its central and eastern
European operations to form one unified business
structure – Mittal Steel Europe.

MDA with Liberian Mittal Steel signs a mining development agreement with
Govt. the Government of Liberia, giving Mittal Steel access to
about one billion tonnes of iron ore resources in the west
of the country.
Acquisition of Kryvorizhstal is acquired for $4.8 billion following a public
Kryvorizhstal auction in Kiev. Kryvorizhstal is Ukraine’s leading
steelmaker with annual steel production of 7.7 million
tonnes and more than one billion tonnes of iron ore
resources. Company subsequently renamed Mittal Steel
Kryviy Rih.

MOU with Mittal Steel signs a Memorandum of Understanding with

Jharkhand, India the State of Jharkhand, India. Mittal Steel expects to invest
$9 billion establishing mining and steel making operations
in the state.

Acquisition of Stelco Mittal Canada enters into definitive agreement for the
subsidiaries acquisition of Norambar Inc., Stelfil Ltée and Stelwire Ltd.
from Stelco Inc. Transaction completed in February 2006
at a cost of C$30 million
Arcelor
Arcelor was created by the merger of Aceralia, Arbed and Usinor, and the
determination of these three European groups to mobilise their technical,
industrial, and commercial synergies in a joint venture to create a global leader
with the ambition of becoming a major player in the steel industry.
Officially launched on February 19, 2001, the merger became effective on
February 18, 2002, when the Arcelor share was listed on several stock
exchanges. The choice of the name Arcelor was announced on December 12,
2001.

Aceralia
1902 : Creation of AHV
1950 : Creation of ENSIDESA
1973 : ENSIDESA (absorption of UNINSA)
1991 : Establishment of CORPORACION de la SIDERURGIA INTEGRAL
1994 : Establishment of CSI Corporacion Siderurgica, by utilizing the profitable assets of
Corporacion de la Siderurgia Integral. Operations begin in 1995.
1997 : Creation of ACERALIA CORPORACION SIDERURGICA and strategic alliance
with the Arbed Group.

Arbed
1882 : Establishment of the parent company
1886 : Beginning of Thomas steel production in Luxembourg
1911 : Merger of the 3 largest steelmakers in Luxembourg and creation of Arbed
1920 : Creation of TradeARBED
1922 : Creation of Cia Siderurgica Belgo-Mineira in Brazil
1962 : Creation of SIDMAR in Belgium
1985 : Majority shareholding in ALZ through SIDMAR
1992 : Control is taken of the former Maxhütte (ex-GDR) and establishment of Stahlwerk
Thüringen
1993 : Organization of the Group in business sectors
1993/97 : Conversion to electric steel production in Luxembourg
1995 : Majority shareholding in Klöckner Stahl, now STAHLwerke BREMEN
1997 : Strategic partnership with ACERALIA (formerly CSI) in Spain
1998 : Integration of ARISTRAIN in Spain - Majority shareholding in Belgo-Mineira

1999 : Takeover of UCIN in Spain

2000 : Sale of the shareholding in Samitri
Usinor
1948: Creation of Usinor, which takes over from Forges et Aciéries du Nord et de l'Est
and Hauts Fourneaux, Forges et Aciéries de Denain-Anzin
1948 : Creation of Sollac, which takes over from the Lorraine steel industry
1964 : Creation of Sacilor, the origin of which dates back to the Wendel group
1981 : Nationalization of Usinor and Sacilor
1986 : Merger of Usinor and Sacilor
1990 : Sollac absorbed by Usinor
1991 : Ugine absorbed by Sacilor
1994 : Special steels grouped together within the Aster holding company
1995 : Privatization of Usinor-Sacilor
1997 : Usinor-Sacilor becomes Usinor
1998 : Acquisition of Cockerill-Sambre, owner of EKO Stahl
1999 : Re-organization of the Usinor group

Board of Directors

Joseph Kinsch Chairman of the Board of Directors

José Ramón Álvarez Rendueles Vice-Chairman of the Board of
Directors
H.R.H. Prince Guillaume of Luxembourg Director
John Castegnaro Director
Jean-Yves Durance Director
Noël Forgeard Director
Jean-Pierre Hansen Director
Ulrich Hartmann Director
Corporación JMAC BV represented by Antoine Director
Spillmann
Hedwig De Koker Director
Manuel Fernández López Director
Michel Marti Director
Daniel Melin Director
Edmond Pachura Director
Francisco Javier de la Riva Garriga Director
Sergio Silva de Freitas Director
Georges Schmit Director
Fernand Wagner Director
 The Initial Bid and the Rejection

January 14: LN Mittal talked to Arcelor CEO Guy Dolle about the possibility of
Mittal Steel acquiring Arcelor. Guy Dolle categorically turns Mittal down.

January 27: Mittal Steel launches a formal takeover bid for $22 billion dollars.

January 29: Arcelor rejected the offer and the French government said it has
"great concerns" about the merger. Arcelor has plants in France.

The market sent Arcelor's Paris-listed shares soaring 29%, to EURO 28.6. Mittal
shares listed in Amsterdam closed up 6.2%, at EURO 27.63. Steel shares
around the world also rose.

Mittal said that Arcelor Chief Executive Guy Dolle wasn't positive about the
approach, but he was confident Arcelor's shareholders will back the bid.

A tie-up between the two companies would create a company with $70 billion a
year in revenue and the most global production capacity in the industry. Arcelor
is primarily a European producer while Mittal is scattered around the globe.

The next largest producers after Mittal and Arcelor are Nippon Steel Corp and
Posco.

Mittal would become the leader in providing steel to the automotive industry in
Europe and the U.S., and would lead in the North American Free Trade Area in
appliances and packaging.
 Hostility and Racism

There was a lot of hostility by Arcelor’s Management Board as they felt that Mittal
Steel was resorting to underhanded techniques to merge with them. They
dismissed the idea of a merger with a "company of Indians".

The European Union said it was against racial discrimination and the issue would
be treated only on commercial considerations.

There was a lot of controversy where racist remarks were made against LN
Mittal.

The bid stirred up passions amongst politicians, other leaders, and common
man. With the European Commission being accused of protectionism and
racism, Arcelor's CEO, Guy Dolle, offered a laundry list of ills in Mittal Steel
because of which the merger should not take place.

In London, a columnist for The Guardian spoke of how the bid unleashed a new
wave of 'economic patriotism,' adding that Mittal and his family were often
portrayed as aliens -- 'the Indians' -- rather than as global entrepreneurs.
 Increasing Offers and Pressure

April 19: Mittal Chairman and Chief Executive Lakshmi Mittal calls Arcelor
Chairman Joseph Kinsch to ask for "friendly discussions'' about revising his
proposal in return for support from management.

April 28: Mittal tells Kinsch he is ready to make "significant corporate

governance changes'' and revise the offer.

May 4: Kinsch says the offer is "wholly inadequate'' and Arcelor has significant
concerns about the real value of Mittal shares.

May 9: Mittal Steel says it is ready to revise the offer and make corporate
governance changes "in the event of a recommended deal.''

May 10: Arcelor Chief Executive Guy Dolle describes as "insufficient'', Mittal's
offer to revise its bid.

May 11: Arcelor says it has filed a lawsuit in the United States against Mittal for
copying a type of steel for the auto industry.

May 12: Both companies announce better-than-expected results, although profits

suffer due to higher costs of raw materials. Arcelor toughens its stance,
announcing plan to spend up to $9.5 billion to buy back almost a quarter of its
shares.

May 18: Mittal formally launches its offer.

May 19: Mittal raises its offer by 34 percent, bringing it up to $32.90 billion and
says it would reduce the Mittal family's stake in the company.
 Severstal – A New Player

Severstal is a Russian company mainly operating in the steel industry, centered

in the northern city of Cherepovets. As such it is the second largest steel
company in Russia, behind Evraz Group. The company is owned by Alexei
Mordashov.

May 26: Arcelor announces a deal with Severstal that will give it a controlling
stake in Russia's steelmaker and $16.4 billion for 32 percent of Arcelor.

June 2: European Union antitrust regulators approve Mittal bid on condition the
new combined steel giant sell off some of its facilities if the bid succeeds.

June 6: The European Commission approved the Mittal-Arcelor merger.

June 9: Arcelor confirms it has held talks with Mittal on the term of its bid.

June 12: Arcelor rejects Mittal revised bid and recommends shareholders accept
deal with Severstal. Arcelor says the revised offer still undervalues the company
and urges shareholders to support the Severstal merger instead, but mandates
its board to explore possible improvements to the Mittal offer at a later date.
Mittal says it won't budge on price, but is prepared to make changes related to
corporate governance.

June 20: In a bid to woo Arcelor, Severstal revised the terms of its merger
proposal, saying that majority owner Mr Alexei Mordashov would settle for 25 per
cent of the new group rather than the initially proposed 32.3 per cent and raised
its offer by about 2 billion.
 Agreement to Merger and Final Merger

June 19: Arcelor cancels shareholder meeting on share buyback amid growing
shareholder opposition.

June 21: Market regulators in France, Spain, Luxembourg and Belgium suspend
Arcelor shares, saying they want more clarity on the state of talks with Mittal and
Severstal.

June 24: Talks on between Mittal Steel and Arcelor

June 25: Arcelor's board agrees to sweetened bid from Mittal worth about $32.3
billion.

June 30: Paving the way for a merger between Arcelor and Mittal Steel, an
overwhelming majority of shareholders of the Luxembourg-based firm vote down
a merger proposal from Russia's Severstal.

57.95% per cent of Arcelor shareholders voted against the Severstal offer.

In the process, they accept Mittal Steel's $32.3 billion offer, which was approved
by the Board of Arcelor on June 25 after a five-month long battle.

Arcelor had recommended acceptance of share and cash from Mittal Steel
valuing at about $32.3 billion, which creates a group with 3,20,000 employees
producing about 116 million tonnes of steel annually, accounting for about 10%
of the world market.

Arcelor chairman Joseph Kinsch told shareholders that the long fight with Mittal
was worth it, saying the India-born steel tycoon L N Mittal and the markets had
finally recognised Arcelor's "true value."

"We have created in five months more than EURO 12 billion in value," Kinsch
said.
Snapshot View of the Merger

Transaction highlights

• Arcelor Mittal: A merger of equals with shared management for

successful integration
– Ownership of 50.5% for Arcelor investors and 49.5% for Mittal
Steel investors

• Recommended transformational merger of the world’s two largest steel

companies with unrivalled global footprint

• The undisputed industry leader

• Creation of company with unprecedented scale and diversification to

manage cyclicality, stabilize earnings and increase shareholder returns

• Annual synergies increased by 60% to €1.3bn (US$1.6bn)

The Combined Vision

• Combination driven by simple and compelling industrial logic, spurring

consolidation in a fragmented industry
• Creation of European-based global champion best positioned to
capture new market opportunities
• New entity will capitalise on strong European heritage and presence, as
well as leading position in North America
• Enjoy unparalleled access to new high-growth markets: Central and
Eastern Europe, Africa, China and Latin America
• Company will be able to service global customers with broad and deep
product offering
• High level of direct access to raw materials making group more
profitable and less cyclical than most of its peers

The Combined Strategy

• Consolidate regional high-end leadership into global customer

platform
• Achieve industrial excellence through state of the art assets sustained
by sound capital expenditure and best in class R&D
• Realise commercial leadership through strong distribution channels
• Capture growth in BRICET countries, utilising existing leadership in
high-end products in mature economies
 • Accelerate growth in key emerging markets such as India and China
• Achieve cost leadership and operational excellence across product
range
• Maintain high level of vertical integration to hedge against raw
materials price fluctuations
• Focus on people management and social responsibility

A Win-win transaction for all stakeholders

From Mittal Point Of View

• Merger would take consolidation to a new horizon.

• Successful distribution business in Europe.
• Mittal Co. to have leadership position in high end segments in Western
Europe with strong R&D capabilities.
• Low Cost slab manufacturing in Brazil that can be expanded for export
to Europe and North America.
• Increased free float and liquidity

From Arcelor Point Of View

• Mittal Company will accomplish Arcelor’s stated plan in the most

efficient way.
• Arcelor becomes a global player.
• Operations in high-growth economies with low-cost, profitable assets
and local operating expertise in numerous emerging markets.
• Leadership position in high-end segments in North America, with
strong R&D capabilities.
• Access to very low cost slab potential in Ukraine to serve West
Europe.
• Access to raw materials and upstream integration.

Finer Details of Merger

• Shareholder voting rights
All shares with identical voting and economic rights: One share - one vote
regardless of holding period

• Composition of initial Board of Directors

o Mr Kinsch to be Chairman, Mr Mittal to be President
o Upon Mr Kinsch’s retirement, Mr Mittal becomes Chairman
o The Board of Directors will be composed of 18 members, all non
executive (majority independent)
 • 6 members from Arcelor
• 6 members from Mittal Steel
• 3 current representatives of existing Arcelor major shareholders
• 3 employee representatives
o After expiry of three year period, shareholders to elect Board of
Directors

• Board Committees
o an Audit Committee composed solely of independent directors
o an Appointments and Remuneration Committee composed of 4
members, including the Chairman, President and 2 independent
directors

• Composition of Management Board

o The Management Board will be comprised of 7 executive members
o 4 current Arcelor executives, CEO to be proposed by the Chairman
o 3 Mittal Steel executives

Key Contract Terms

• Other offers
Arcelor has agreed they will accept no other offer for Arcelor shares unless it is a
superior offer for the entire share capital of Arcelor
o No break-up fee required in contract
o If shares are issued under the Strategic Alliance Agreement, corporate
governance rules and certain other conditions terminate

• Standstill
Mittal family has agreed to a standstill at 45% of share capital. Exceptions in
certain circumstances - consent of a majority of the independent directors or in
case of passive crossing of such thresholds

• Lock up
Mittal family has agreed to a 5-year lock-up, subject to certain exceptions,
including the right to dispose of up to 5% of the share capital after the 2nd year

Increased identified synergies

Marketing and trading (US$570m)

• Accelerated growth of distribution in developing regions e.g., CEE, CIS, Africa

• Cross selling through enlarged and enhanced product portfolio
• Optimisation of order book for cross product flows and logistical savings

Manufacturing and process optimization (US$470m)

• Benchmarking and best practice alignment across all operating assets
• Optimisation of utilisation of assets through selected mill product specialisation
(e.g., productivity gains with better sequencing rates, fewer changeovers)
• Logistical and mill optimisation through transfers of semi finished products

Purchasing (US$500m)

• Scale effects on standardisation of procurement contracts

• Optimisation and efficiencies from maintenance services, subcontracting, spare
parts and consumables
• Logistics savings on optimisation of raw material flows

SGA (US$60m)

• IT synergies
• Reduction in external contracts e.g., consulting services
• Duplication in commercial network avoided

Unmatched Financial Strength

Arcelor Mittal pro-forma key

Arcelor Mittal (US$bn)
financials
Revenue 2005 US$77.4bn
EBITDA 2005 US$14.4bn
Margin (%) 18.6%
Net Debt Q1-06 * US$24.0bn
Gearing 56%
Net Debt / EBITDA 1.7x
Cash flow from operations 2005 US$9.7bn
Capex 2005 US$4.1bn
Free cash flow 2005 US$5.6bn

Financial policy for sustainable shareholder value

creation

• Efficient capital structure and return of excess cash to shareholders

• 30% dividend payout ratio over the cycle
• Unparalleled financial flexibility to pursue internal and external growth
opportunities
• Commitment to investment grade credit rating
• Maintain high returns on capital

Conclusion

The largest steel company in the world is created, a company larger than the
next 3 largest steel companies combined. According to the press releases issued
by the companies, “Consolidation creates value in the steel industry”.

Arcelor is the number 1 steel producer in the world by revenue.

Mittal is the number 1 steel producer in the world by shipments.

• Both companies have been leaders in steel industry consolidation

• Consolidation is contributing to increased discipline by producers
• Combination of top two players takes consolidation to a new level

Arcelor is primarily a European player, while Mittal has interests all around the
world. Together, they form

• World’s number 1 steel company

• Leading positions in 5 major markets
• 61 plants
• 27 countries
• Numerous international partnerships and Joint Ventures
• Opportunity to grow in China and India

The new company is number 1 in North America, South America, Africa, Western
Europe, Eastern Europe and CIS countries.
A very vital omission from this list is Asia and more importantly, LN Mittal’s home
country, India.

Why has LN Mittal not concentrated on India so far? One can speculate that he
was going at it step by step, conquering the world markets one by one and now,
only India is left.
Till now, he has shown virtually no interest in the Indian market.

Recently, he has shown interest in investing large amounts of money in

Jharkhand and Orissa, amounting to about Rs. 40,000 crore.
Logically his next stop would be Asia, as China and India are the fastest growing
steel consumption markets. In 2005, the US witnessed a 15.4% fall in
consumption, and the fall in EU was 11.7%. Total global consumption still
managed to rise 5.3%, thanks to a massive 25.9% rise in demand in China and
an impressive 7-8% demand in India.
Some analysts say that Mittal had to pay a much higher price than was actually
required to merge with Arcelor. He also did not get the best deal that he could
have, as his controlling stake in the newly formed Arcelor-Mittal is lower than
what was originally aimed for.

Mittal Steel is the world's largest steel producer at 70 million tonnes a year,
almost double the world's second largest producer - Arcelor. October 2005 saw
the first battle between the big two- Mittal and Arcelor, both bid for Ukraine's
largest steel mill - Kryvorizhstal in an open televised bid. Mittal beat Arcelor to the
$4.8 billion deal, much more than the $3 billion at what analysts had valued
Kryvorizhstal.

Reports suggest that it was this bidding war with Arcelor that gave L N Mittal's
son Aditya, the CFO of Mittal Steel, the idea of taking over Arcelor. His reason
was that it would eliminate any future messy battles.

Why was the deal so important for LN Mittal? In a snapshot, the Mittal-Arcelor
combine would have an even larger share of the global steel market and would
be able to get a better grip over steel pricing.

Severstal had to be paid legal fees as they had been completely cut out of the
deal. Now Severstal has threatened a legal battle and a fresh bid. If that
happens, the immediate future, at least, will not be glinting enough to Mittal’s
advantage.

It has been a win-win transaction for both parties.

• Creating the undisputed leading global steel company

• Growth and value creation opportunities maximised through unique
global platform
• Step change in steel industry consolidation
• Significant synergy potential
• Financial strength and strategic flexibility reinforced
• Leadership in R&D/product development
• Significant free float and liquidity
• Re-rating potential
• Positive for all stakeholders

In the end, a European company had to finally give in and merge with
“a company of Indians”.
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Outlook Magazine – 10th July 2006 – Pages 46-48