The Hindu Business Line : Consolidation means sustainability: Mittal

Mr Lakshmi Niwas Mittal has won the long drawn battle for Arcelor. But what does this victory mean for Mittal Steel, the global steel industry and for the man himself? Mr Mittal says the steel industry needs consolidation as it means sustainability.

Excerpts from CNBC - TV18's exclusive interview with Mr Lakshmi Niwas Mittal:

On top of the world in all sorts of ways?

It is a very fantastic movement. I am very proud of what we have been able to achieve. It has been a long journey. It started from January, took lot of hurdles, problems and frustrations.

Do you think there was justice here? SeverStal was brought in to keep you out and in fact, it might have ended up delivering it to you?

There have been a lot of hurdles created to frustrate our transaction. But I am very pleased that shareholders got up on their feet and they mobilised themselves. They asked the Arcelor Board to review and revisit their decisions, and they wanted to be given a fair chance as shareholders.

The SeverStal transaction was not very clear to shareholders; it was kind of an opaque situation. They did not understand the value; they never got to know the industrial logic and industrial rationale. We have been working on this transaction for so many months, explaining to all the shareholders and stakeholders about the industrial logic and rationale behind this transaction.

Suddenly, they saw a company SeverStal, without proper and full disclosures. So, they got upon their feet and they protested. I think it made a big difference.

But the shareholders were thinking one way, the Arcelor management was going another way. What was the reason for the disconnect?

I think, the whole process began with emotions and there has been lot of emotional outbursts with the process.

Why?

I think, Arcelor was not expecting an unsolicited bid on the company. For them, it was the price and they never looked objectively into the whole thing. It became more of a subjective decision and of emotions.

Was there a subjective view that you are an Indian?

I never experienced this kind of feeling. But I read lot of comments made by some of the Arcelor key management. It was quite emotional and perhaps, not required.

But you will now be working with the same Arcelor Board, Mr Guy Dolle, who of course led the opposition against you, he will now manage the merger, does that sound a bit odd?

MrGuy Dolle will not be the Chief Executive of this company after the merger is done; this is what he has announced. Because of his experience, we wanted him to get involved for the smooth integration for sometime. But very soon the Board of Directors of Arcelor will consider a new CEO.

You and Mr Kinsch spoke a great deal about the metaphor of marriage, but many of us know that it is perhaps easier to get married than to stay married. Are you anticipating any difficulties here?

I do not expect problems in this integration and successful marriage. First of all, both companies have a lot of experience in integration and merger. This experience, if put together with the best team and with a desire to work together to make it successful, then I don't think there would be any problems. It should be a smooth transition and integration.

In the end would you call it an acquisition, merger or perhaps a reluctant merger?

I would call it a merger of equals. Clearly, a number one and number two company merging is generally a merger of equals.

What was it like at home because your wife, your son everyone is involved in the business? So do you talk steel at breakfast, lunch and dinner?

It is true that for the last five months this has been the major topic of discussion at home. Such a major and unique transaction is being done in the steel industry and since the whole family is involved in the business, it naturally became a topic of discussion all the time.

Is there a sort of steely determination running through the family and are you looking to another acquisition?

We have said steel industry needs consolidation, which means sustainability.

But consolidation is another name for monopoly, isn't it?

Of course not. The industry has been so fragmented they never had a clear objective, or direction. Now with consolidation, the industry will have a much clearer direction in the future. They will be able to deliver the values and returns to shareholders.

Are you trying to have enough control on both supply and prices?

I do not think that is right, because we will only be producing 10 per cent of the global production.

But you are not stopping at 10 per cent?

We are stopping at 10 per cent, there should be couple of more players, global players in the range of 150-200 million tonnes. We are ahead of the game at least couple of years than the competition.

What is your target?

We believe that at least there should be one company, which should be in the range of 150-200 million tonnes.

Do you think you might have paid too much for Arcelor following the determination to get the company?

The steel industry's multiples are very low. If it is compared with other industries that are consolidated and have delivered proper values to the shareholders; the multiples are very high. I believe that with this merger, the steel industry should be re-rated and should be able to command higher multiples in terms of valuation and should be able to deliver value to the shareholders.

Has this acquisition or merger meant a substantial amount of debt for Mittal Steel?

We have announced very clearly that we will maintain our credit rating. Today both the companies have investment credit rating. Even after the merger we have seen and we have talked to the credit rating agencies, we will still be maintaining our credit rating. Do not forget that with this merger we have also announced $1.6 billion of new synergies.

More Stories on : Interview | Steel | Mergers & Acquisitions

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Bill on new company law likely in winter session

Nilgiris tea estate for sale

US co Dodson-Lindblom to enter Indian hydel biz

Bayer to house polyurethane unit in Noida

Consolidation means sustainability: Mittal

ICAI for bar on bonus issues from revaluation reserves

SAAG RR foray into work-over rig services biz

`Hotel tariffs will soften only a tad'

Vardhaman group plans foray into AC segment

V.C. Agrawal new MD of IBP