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 sectorowned 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 worlds biggest producer of DRI. With two technical research facilities, their product development teams are ready to meet the needs of the most demanding customers.

Mittal Steel Growth Timeline

Year 1989 Acquired Iron & Steel Company Of Trinidad & Tobago Sibalsa Sidbec-Dosco Hamburger Stalwerke Description A modern technologically advanced Steel Complex. Renamed as Caribbean Ispat. Mexicos Third Largest Steel Producer. Renamed as Ispat Mexicana. Canadas number four steel maker is bought from the Government of Quebec and renamed Ispat Sidbec. Germanys fourth largest producer of wire rod, renowned for its mini-mill expertise and renamed as Ispat Hamburger Stahlwerke. The Group buys a 5.5 million tons pa blast furnace steel plant in Kazakhstan, renamed Ispat Karmet. Ispat International buys Americas fourth largest steelmaker, Inland Steel Company and renames it Ispat Inland.

1992

1994

1995

Karmet 1998 Inland Steel Company

1999

Unimtal ALFASID SIDEX

Ispat International buys the French company, Unimetal Group, including Trefileurope and SMR, from Usinor. LNM Holdings buys 70 per cent of ALFASID from the Algerian government and renames it Ispat Annaba. LNM Holdings acquires SIDEX, an integrated steelworks in Galati, being privatized by the Romanian government. Renames it Ispat Sidex. LNM Holdings signs a business assistance agreement with the South African steel producer, Iscor. LNM subsequently takes control of Iscor in June 2004. Ispat Iscor has now been renamed Mittal Steel South Africa. LNM Holdings signs an agreement to buy Nova Hut, the largest steel producer in the CzechRepublic, from the Czech government. The acquisition, at an all -in cost of $905 million, takes ef fect in January 2003 and the company is renamed Ispat Nova Hut. LNM Holdings buys a controlling holding in Polands 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. LNM Holdings buys Bosnias BH Steel, committing itself to the biggest ever investment in Bosnia by a foreign company. LNM adds to its downstream activities in the Balkans with the acquisition of hot and cold rolling mills in Skopje, Macedonia. The two m ills, dormant for two years, are renamed Ispat Skopje. LNM Holdings and Ispat International announce their merger - to form Mittal Steel. At the same time, Mittal Steel announces an agreed takeover of International Steel Group of the US in a cash and shar es deal worth $4.5 billion. Once the proposed acquisition is completed, it will create the worlds 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 wil l 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.

2001

2002

Business assistance agreement signed with Iscor Nova Hut

2003

2004

Polski Huty Stali

BH Steel

Macedonian facilities from Balkan Steel

Creation Of Mittal Steel and Proposed Acquisition Of International Steel.

2005

Acquisition of stake in Hunan Valin

Mittal Steel announces a share purchase agreement to acquire 36.67 per cent of Hunan Valin Steel Tube & Wire, one of Chinas top ten steelmakers with annual capacity of 8.5 million tonnes. The move marks Mittal Steels entry into the Chinese steel industry . The acquisition of ISG is completed and the company is merged with Mittal Steels existing US operation, Ispat Inland, and subsequently re -named Mittal Steel USA. Mittal Steel restructures its European business, merging its western European operations with its central and eastern European operations to form one unified business structure Mittal Steel Europe. Mittal Steel signs a mining development agreement with the Government of Liberia, giving Mittal Steel access to about one billion tonnes of iron ore resources in the west of the country. Kryvorizhstal is acquired for $4.8 billion following a public auction in Kiev. Kryvorizhstal is Ukraines 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. Mittal Steel signs a Memorandum of Understanding with the State of Jharkhand, India. Mittal Steel expects to invest $9 billion establishing mining and steel making operations in the state. Mittal Canada enters into definitive agreement for the acquisition of Norambar Inc., Stelfil Lte and Stelwire Ltd. from Stelco Inc. Transaction completed in February 2006 at a cost of C$30 million

ISG Acquisition Completed Mittal Steel Europe Created

MDA with Liberian Govt.

Acquisition of Kryvorizhstal

MOU with Jharkhand, India

Acquisition of Stelco subsidiaries

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.
y y y

Unites the worlds two largest steel companies with unrivalled global footprint. Complementary assets and skills across all areas. Creation of company with unprecedented scale and diversification to manage cyclicality, stabilize earnings and increas e shareholder returns.

y y y y

US$1bn of estimated annual synergies EPS accretive transaction Creates a powerful force in ongoing industry consolidation A transaction that will redefine the global steel

Strategic Rationale for the Merger

y y

y y

y y

Consolidation generates economies of scale, improved returns and a greater ability to sustain investment in research and development. The merged entity will immediately achieve industry leadership with a production capacity of approximately 130 million tonnes a year and around 1 0 per cent of world steel output. The combination will allow each company to fill its respective geographical gaps. The combination of Mittal Steel and Arcelor will result in a steelmaker more than three times larger than its nearest competitor and with ev ery chance of reaching a production capacity of between 150 million tonnes and 200 million tonnes within ten years. Vertical integration with mining operations to provide a hedge against fluctuating raw material prices Total value of synergies to be realized US$1.6 billion
600
530

570

500
400 400 300

200 100
0 Marketing and Trading Purchasing Manufacturing & Process Optimisation

Transaction Benefits
A Win/Win strategic proposition For Arcelors Shareholders-

y y y y y y

Integrate Arcelor strength Into a stronger global network. -including #1 position in North America. Accelerate growth by accesing new markets in China, India, East Europe, Africa and Central Asia. Improves margin and control costs through mining integration. Partnership with the most successful entrepreneur of the industry. Realise US$1 billion of synergies.

For Mittal Steels Shareholdersy y y y y

Globalise North America added value leadership in west Europe. Reinforce low cost leadership position with South America. Gain undisputed technological and product development leadership. Reduce volatility with long term contracts and geographical diversification. Realise US$1 billion of synergies.

Key Risks
y y y

Contrasting culture of two companies The Steel Price may slow down Extent of synergies realized through the Merger

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 b illion 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 Arcel or 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 Arcelors Management Board as they felt that Mittal Steel was resorting to underhanded techniques to merge with them. They d ismissed 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 "frie ndly 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'' a nd 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, cent ered 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 $3 2.3 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 worlds 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

y y y y y y

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 herit age 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

y

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

Strategy adopted by Arcelor to thwart Mittal bid

Declaration of dividend On February 16, Arcelor declared a dividend to convince the shareholders of a positive situation under current management The Russian Angle To thwart the offer from Mittal Steel, Arcelor released a 16.6 billion Euro merger plan with Severstal, a Russian company

A Win-win transaction for all stakeholders

From Mittal Point Of View

y y y y y

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

y y y y y y

Mittal Company will accomplish Arcelors 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

y 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 Kinschs 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

y 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 y 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 y 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 r ates, 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, subcontrac ting, 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

Comparison : Arcelor Mittal and Tata-Corus

Arcelor-Mittal EV/Tonne EBITDA Offer 4.5 times Cash cum Stock Swap

Tata-Corus $710 9 times All Cash