The Hindu Business Line : Arcelor takeover: Suspense, surprise, satisfaction

The polished name board on the outside of the majestic building bear the name "Arcelor Mittal." By the second quarter of 2007, this building - commonly referred to as Arcelor castle in Luxembourg - built in the early 1910s, will become the headquarters of Arcelor Mittal, the largest steel company in the world.

Once the merger of Arcelor and Mittal Steel is completed, the headquarters will shift from the Netherlands to this building, giving the Luxembourgers some satisfaction - that even though Arcelor, with whom most Luxembourgers have a fond attachment, has been bought over by Mittal Steel, the company's head offices will still remain in their country.

Mittal Steel's takeover bid of Arcelor was a hotly debated issue in Luxembourg, as a group of Indian journalists on a tour of Luxembourg found out during their interactions with government ministers and officials.

"The surprise effect of the takeover was one of the reasons why the Luxembourgers reacted so adversely to the takeover announcement," says Mr Luc Frieden, Minister for Treasury and Budget. "The steel industry was the source of wealth of the country and everybody had somebody working in the steel industry," he tells the Indian journalists during a meeting in his office.

Recalls Mr Jeannot Krecke, Minister for the Economy and Foreign Trade, the beginning of the story was not a happy one. There was resentment in the population and at the political level, danger of being taken by surprise. After all, Luxembourg had a 6 per cent equity stake in Arcelor. "It wasn't easy explaining to the people here," he adds.

During his interaction with the journalists at Arcelor castle, Mr Lakshmi N. Mittal, President and CEO, Arcelor Mittal, declines to talk about the company. He instead chooses to focus on the attractiveness of Luxembourg for doing business. He says the company will re-locate its headquarters to Luxembourg from the Netherlands in the second quarter of this year, once the merger process is completed. "Being a small government, you can talk to them easily. You are easily heard and you can interact with high officials easily," says Mr Mittal.

Both Mr Frieden and Mr Krecke recall the extensive discussions they held with Mr Mittal and his son Mr Aditya Mittal during the whole takeover process. And, they assert that these discussions helped a lot in making the deal happen. Mr Frieden says that Mittal Steel listened to a number of key concerns of the Luxembourg Government, including re-locating the merged entity's headquarters in the country.

According to Mr Krecke, the prospect of job loss was one of the main issues worrying the people. The discussions, most of them "secret" in his words, helped in sorting out the issues.

India plans

On his plans for India, Mr Mittal says the company's announced plans in the country will happen in two-three phases. (Arcelor Mittal has expressed interest in setting up steel plants in Jharkhand and Orissa for integrated steel plants. While doubts have been expressed over the Jharkhand project, Arcelor Mittal signed an agreement with the Orissa Government for a 12 million tonnes a year plant involving an investment of Rs 40,000 crore.) The company has not closed its plans about Jharkhand, according to him.

Mr Mittal says the company wants to strengthen its presence in South East Asia. It has joint ventures in China and is looking at more in the country. Difficulties in getting land and iron ore mining locations are issues that need to be addressed by the State governments in India if the projects are to progress.

`Curb only exports of higher grade iron ore'

Mr Lakshmi N. Mittal, President and CEO, Arcelor Mittal, favours restricting exports of superior grade of iron ore while allowing exports of the not so good grade of ore.

Answering questions from Indian journalists in Luxembourg last week, he said: "My view is that we have plenty of iron ore but we should restrict iron ore export of the higher Fe (iron) but lower Fe iron ore we should allow exports."

It may be recalled that Chief Ministers of three mineral rich States - Chhattisgarh, Jharkhand and Orissa - wrote to the Centre in December 2006 asking that iron ore exports be frozen at the current levels and gradually reduced. The Indian steel industry has also been asking for a ban on iron ore exports and instead wants domestic manufacture of steel to be encouraged to ensure that value addition happens within the country. However, the Anwarul Hoda committee appointed by the Planning Commission to come up with a minerals and mining policy recommended lifting of qualitative and quantitative restrictions on iron ore exports.

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