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Mittal Steel says Lakshmi key to growth; but has no life cover
May 16, 2007 18:52 IST
Mittal Steel, which on Wednesday surpassed its own earnings and sales forecasts for the first quarter, owes its growth to its founder chief Lakshmi Mittal, but has no 'key man life insurance.'
Key man life insurance is a policy aimed at helping a company whose survival rests on one or two people. The company pays the premium and is the beneficiary if the key figure is no more.
"Mittal Steel does not maintain key man life insurance on its chairman of the board of directors and chief executive officer," the company said, while noting Mittal's strategic vision has been instrumental in creating the world's largest and most global steel group.
The company's annual report for 2006, sent to shareholders in the United States earlier this month, disclosed that any loss or diminution in the services of Lakshmi N Mittal posed a key risk to any forward-looking statements from the company.
Mittal had engineered the over $38 billion buyout of Luxembourg-based Arcelor last year, and is set to become the combined entity's president and CEO.
Arcelor Mittal on Wednesday reported a 44 per cent jump in the combined profit at $2.3 billion in the quarter ended March 31, while sales grew over 17 per cent to over $24.5 billion from the year-ago period.
The results were above its own guidance with accelerated synergy benefits worth $573 million in the quarter from the merger.
However, Mittal Steel, to be renamed Arcelor Mittal after completion of the merger later this year, believes that it was Lakshmi Mittal, who has been and would continue to contribute significantly in its growth story and business strategies.
"The chairman of the board of directors and CEO has for over a quarter of a century contributed significantly to shaping and implementing its business strategy, and the loss or diminution of his services could have a material adverse effect on Mittal Steels business and prospects," the annual report said.
Besides, the NRI business tycoon also has the ability to exercise significant influence over the outcome of any shareholder voting at the company with control over about 45 per cent of voting shares, the report disclosed.
With his large shareholding, he has the ability to influence significantly the decisions related to mergers or other business combinations, the acquisition or disposition of assets, issuing equity and incurring debt, it added.
He also has the ability to significantly influence a change of control of Mittal Steel, the report said.
Mittal Steel is part of a business empire founded by the 56-year-old Lakshmi Mittal in 1989 and has experienced rapid and steady growth since then largely through the consistent and disciplined execution of a successful consolidation-based strategy, the report said.
Mittal made his first acquisition in 1989 by leasing the Iron & Steel Company of Trinidad & Tobago, followed by other takeovers like Thyssen Duisberg (Germany) in 1997, Inland Steel (USA) in 1998, Unimetal (France) in 1999, Sidex (Romania) and Annaba (Algeria) in 2001.
This was followed by Nova Hut (Czech Republic) in 2003, BH Steel (Bosnia), Balkan Steel (Macedonia), PHS (Poland) and Iscor (South Africa) in 2004, ISG (USA), Hunan Valin (China) and Kryvorizhstal (Ukraine) in 2005 and three Stelco Inc subsidiaries (Canada) and Arcelor in 2006.