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LAKSHMI MITTAL AND THE GROWTH OF MITTAL STEEL ( Study case, chapter 7 )

LAKSHMI MITTAL AND THE GROWTH OF MITTAL STEEL ( Study case, chapter 7 ). Andréanne Delisle Simone Frscoli Marco Luraghi. FORCES THAT DROVE MITTAL EXPANDING. 1970 Limited growth opportunities in India due to : Regulations constraints Competition from 2 big rivals

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LAKSHMI MITTAL AND THE GROWTH OF MITTAL STEEL ( Study case, chapter 7 )

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  1. LAKSHMI MITTAL AND THE GROWTH OF MITTAL STEEL (Study case, chapter7) AndréanneDelisle Simone Frscoli Marco Luraghi

  2. FORCES THAT DROVE MITTAL EXPANDING • 1970Limitedgrowthopportunities in India due to: • Regulationsconstraints • Competitionfrom2 big rivals • 1975 Steel makingplant set in Indonesia • 1989 1° acquisition (“Iron & Steel” of Trinidad & Tobago) • After 1989 Global steel industrywas in a slump. Lakshmipredictedthat the industrywouldhaveturned a corner. Itwas TRUE.

  3. WHY M&A INSTEAD OF GREENFIELD INVESTMENT • M&A are quickertoexecute. • Acquiring a foreignfirmmeansalsoacquiringvaluablestrategicassets (i.e. equipment, customers and distributionsystems). • Lessriskytobuysomethingexsistingthan building itfrom the ground. • Mittalbelieveditcouldincrease the efficiencyof the acquiredunitbytransferring capital, technology and management skills.

  4. Global growth • Geographic presence: 27 countries, across 4 continents with operations among more than 60 nations. • Also in developed countries. • Brazil’s central role in South America. • Future plans: Building a strongerpresence in Asia andincreasing the global market shares (20% today).

  5. Mittal’s advantages “Not a single country that we operate in accounts for more than 8 per cent of our total sales…we are not dependent on one or two people.” Says Mittal. • Increasing revenues and market shares. • Less concentrated risks. • Having economies of scale. • Cross-selling operations. • More confidence, know-how and synergies. • Reduction of tax liabilities.

  6. Countries’ benefits VS. drawbacks • Lower prices. • Improving the domestic economy. • More trade operations. • “Minute factory” model for emerging nations. VS. • No spaces for rivals. • Excess of demand. • Higher public expenditure.

  7. Acquisition of Arcelor • Hostile takeover bid • Mittal offered $32 Billion • The acquisition was contested • Management of Arcelor • Politicians • The deal was approved in late 2006 • ArcelorMittal is now the world’s largest steel company.

  8. Why did the politicians object? • Public opinion • Social context (Arcelor employees) • Governments were shareholders • Pressures from Arcelor Management Aretheseobjectionsreasonable?

  9. THANKS FOR YOUR ATTENTION!!!

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