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Abstract:
On 27 January 2006, Mittal Steel, the world's number one steel producer, announced it would make a hostile bid on its rival, the number two 2 steelmaker, Arcelor. The bid was rejected by Arcelor's board, which caused virulent reactions by government entities that were directly or indirectly involved. Mittal Steel, based in Rotterdam and London, was created and is still mostly owned (87%) and managed by a steel magnate, an Indian-born, self-made entrepreneur, Lakshmi Mittal. Since the 1970s, he followed a successful strategy synonymous of early globalisation; he bought several inefficient and old state-owned assets cheaply in nations with weak or non-existent unions, overhauled them and turned them into cash generating machines, which in turn helped fuel his next acquisition. In that January, the target was a totally different profile. Indeed, Arcelor was created in 2002 from a merger of three European steelmakers: Aceralia (Spain), Arbed (Luxembourg) and Usinor (France), each considered in its home country as a national champion. The case discusses and highlights: (1) each company's development model and corporate governance; (2) key recent issues within the steel industry, such as globalisation, emerging countries and consolidation and the impact of each on the company's strategy and how it justified the bid; (3) Mittal Steel and Arcelor's similarities on industrial and geographical levels; and (4) the role of the state in protecting national champions and how governments and Arcelor questioned the logic of the takeover.
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