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Arcelor-Mittal: Some tricky issues remain
Moneycontrol.com | June 26, 2006
After months of wrangling and drama, the Arcelor-Mittal deal is finally done. CNBC-TV18 reports on how the new entity is likely to fare.
A stormy courtship seems to have finally ended in an alliance, and if the shareholders endorse it on June 30, the marriage will be formalised. The new Arcelor-Mittal entity will produce nearly 10 per cent of the world's steel. That puts Arcelor-Mittal in a very strong position.
The two biggest steel makers will not need to undercut each other, but focus entirely on growth and increase in margins. But that's one part of the story. This alliance might not quite be a bed of roses. Most of the directors on the new company's board come from Arcelor and they were not quite in favour of Mittal.
That means Mittal might face problems. The price Mittal apparently offered for his 45 per cent stake may also skew valuations that may be difficult to justify.
Jason Hunter of Steel Business Briefing said, "This may be attractive to some other financial investors, but certainly for the individuals who are looking to gain additional long term values to their investments, this may not be quite as attractive as they were hoping."
The combined entity will have 61 plants in 27 countries and some 320,000 employees all over the world. Industry observers say that shedding excess staff and integrating the two management teams might pose a problem.
Jason Hunter adds, "The difficult thing between the two companies is going to be the integration of the management team, both in Europe and in North America and other regions, due to the hostilities that had been going on over the last five to six months. Some of them have been fairly aggressive on the comments from both sides.
Shareholder approval on June 30 is likely to be a mere formality. Arcelor-Mittal will look to enhance its value to shareholders and live together, happily ever after.For more on markets & business, log on to www.moneycontrol.com