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Lakshmi Mittal's $19-billion year!

By Paul Maidment, Editor, Forbes
Last updated on: March 11, 2005 16:36 IST
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In raw dollars, no one had a better year that Lakshmi Mittal.

The London-based, Rajasthan-born steel baron was the biggest dollar gainer on this year's listing of the world's billionaires, adding $18.8 billion to his net worth.

That took him to $25 billion, sufficient to vault the 54-year old Mittal a full 59 places up the billionaire ranks, making him the third-richest man on the planet, just behind Microsoft's Bill Gates and Berkshire Hathaway's Warren Buffett.

What accounted for Mittal's annus mirabilis? Soaring world prices for steel helped, as did his acquisition of yet more mills, especially in Eastern Europe. Overall, last year Mittal saw his steel businesses's profit triple to $4.7 billion on sales of $22.2 billion.

Additionally, our published net worth figure has increased as the true value of Mittal's growing empire has become more transparent. Recently, Mittal has consolidated his various private steel holdings into public companies. Mittal Steel's shares are listed on the New York and Amsterdam stock exchanges.

But it was a $17.8 billion spectacular double-merger at the end of last year that truly catapulted Mittal into the ranks of the five richest people on the planet.

Coming from a steelmaking family, Mittal struck out on his own in 1976. By a year ago, Mittal Steel had become the world's second-largest steelmaker behind Luxembourg-based Arcelor. This year it will become the undisputed No. 1.

World's Largest Steel Producers
Company Country 2004 Production*
Mittal Netherlands 57
Arcelor Luxembourg 42.8
Nippon Steel Japan 31.3
JFE Japan 30.2
POSCO South Korea 28.9
Shanghai Baosteel China 9.9
Corus, Netherlands U.K. 19.1
*Millions of tons. Source: company reports

Last December, in a reverse takeover, Mittal combined his two principal steel interests, LMM Holdings and Dutch-based Ispat International, which had been spun off in a 1997 public offering. At the same time, he announced that the newly enlarged Ispat, now renamed Mittal Steel, would pay $4.5 billion to buy Ohio-based International Steel Group.

ISG was born out of the bankruptcies of six storied names in American steel, including LTV and Bethlehem Steel.

The ISG merger will make Mittal Steel, which also bought Inland Steel in 1998, the largest steel producer in the US and increase its overall annual production capacity from 48 million tons to 70 million tons. As a result, Mittal's revenue in 2005 is expected to rise 45% to $32 billion.

The ISG deal will boost Mittal's total workforce to 165,000--for now. Mittal has said he will have to cut 45,000 jobs by 2010 to keep the group profitable.

Mittal Steel employs 50,000 people in Kazakhstan alone, from where it supplies the Chinese market. Mittal also has large operations in Romania, the Czech Republic, South Africa and the U.S., and is buying a 37.2% stake in Hunan Valin Steel Tube & Wire in China.

Completing the ISG deal will also take Mittal Steel to a 6% share of the world market. The steel industry remains highly fragmented. The top three producers account for only 15% of worldwide sales.

Mittal has long believed the industry has to consolidate and globalize, which has driven his acquisition drive. He has expanded into emerging markets, buying Nova Hut in the Czech Republic, Polski Huty Stali in Poland, Petrotub in Romania, BH Steel in Bosnia, Balkan Steel in Macedonia, Alfasid in Algeria and Iscor in South Africa.

Mittal's Wharton-educated son, Aditya, is the group's president and chief financial officer. But it was Mittal's other child, his daughter Vanisha, who attracted the spotlight last June.

Mittal threw a lavish wedding party for 23-year-old Vanisha, who married Amit Bhatia, a Delhi-born investment banker based in London. More than a thousand guests were flow in from around the world. The invitations were 20 pages thick and encased in silver, and the festivities lasted five days spread across some of France's most famous settings, including the chateau built for Nicolas Fouquet, King Louis XIV's finance minister.

Indian press reports tagged the cost at $55 million.

Mittal is no stranger to extravagance. He paid $127 million for a 12-bedroom mansion in London's tony Kensington Palace Gardens, a record price for a private residence. The home was formerly owned by Formula One racing boss Bernie Eccleston.

Iranian-born art collector and financier David Khalili extensively renovated the property in the 1990s.

But Mittal and his family can well afford it. Mittal Steel is planning to pay a 40-cents-a-share-dividend, analysts say. Mittal and his family own 97% of the company, which would give them a $260 million payout, one of the largest dividends ever paid to a family-run business.

Going forward, the family is understood to be diversifying by selling 11% of the company for $2 billion, reducing their holding to 88%.

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Paul Maidment, Editor, Forbes

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