Mittal Steel

Company Snapshot:

With 70 million metric tonnes of steel capacity, Mittal is the world's largest steel company, generating $31 billion in annual revenues, $7 billion in profits, and employing 165,000 in 14 countries. The company is controlled by Lakshmi Niwas Mittal (aka the "Carnegie from Calcutta"), one of the richest men in the world.

Basic information

Ownership status:

Publicly traded

Number of employees worldwide:

After the 2004 merger, the company expected to employ some 165,000 workers in 14 countries.

Chief executive officer:

Lakshmi Mittal, Chairman and CEO

Corporate accountability

Brief company history:

Lakshmi Niwas Mittal, the largest steel company in the world, is controlled by Lakshmi Mittal of India, one of the world's richest men, who started in his family's steel business in the 1970s. Mittal created his steel empire by taking poorly performing assets, often through privatization programs. His first big acquisition was in Mexico, but he made his name in central and eastern Europe by taking over and turning around steel plants widely perceived as overmanned, badly managed and lacking in investment. His biggest break was the 1995-acquisition of Kazakhstan's national steel plant, Karmet, for $400 million.

In 2004, Mittal acquired U.S.-based International Steel in a merger that created a new company whose value was estimated at $21 billion. The deal resulted in the largest steel company in the world. The company is listed on both the New York and Amsterdam stock exchanges, and is 88 percent controlled by the Mittal family. ISG has close contacts with big steel consumers such as automobile and consumer appliances industries.

Days before the merger, Ispat Steel (77% owned by Mittal), was folded into the LNM Group.

Even before the ink had dried on the ISG deal, Mittal declared his interest in buying Turkey's largest steelmaker, Eregli Demir ve Celiz. Besides exploring more privatisation opportunities in the CIS republics like Ukraine and Russia, Mittal has turned its attention towards India and China, where he planned to invest $100 million (Rs 460 crore) in a cold rolling mill.

Chronology

1976: Mittal Joins Ispat Indo (65,000 mta capacity) in Indonesia, set up by his father M.L. Mittal

1989: Makes his big first move. Buys into a steel plant in Trinidad & Tobago (Caribbean Ispat: 0.9 MMTA)

1992: Buys Sicarsta of Mexico (3.4 MMTA) for $220 million, compared to the $2 billion invested by the Mexican government just a decade earlier.

1994: Acquires Sidbec of Canada, which has a capacity of 1.4 MMTA

1995: Buys Ispat Hamburger Stahlwerk in Germany (0.86 MMTA)

Snags Ispat Karmet in Kazakhstan (3.75 MMTA)

1996: Ispat Karmet acquires a power plant and coal mines to assure supplies

1997: Ispat International comes out with a $776 million IPO. Is listed on NYSE and Amsterdam stock exchanges.

1998: Acquires Ispat Inland in the US (5.3 MMTA)

1999: Buys Ispat Unimetal of France

2001: Beats French company Usinor to acquire Ispat Sidex in Romania (3.83 MMTA) Picks up a majority stake in Ispat Annaba in Algeria (0.95 MMTA)

2002: Strikes a strategic equity partnership with Iscor South Africa (6.25 MMTA)

2003: Acquires Ispat Nova Hut in Czech Republic (2.86 MMTA)

2004: Lines up plans for a 0.4 MMTA, $100-million cold rolling plant in China. Also acquires Ispat Polska Stal in Poland (6 MMTA), BH Steel of Bosnia (0.2 MMTA), and announces a merger with International Steel Group of the US (20 MMTA)

Corporate accountability:

Antitrust concerns? After the 2004 merger with ISG, Mittal Steel controlled 6-7 per cent of the global steel production of 1 billion tonnes. While by the standards of other industries that's hardly a significant share, soaring steel prices may well prompt the regulators to keep a close watch on Mittal. Mittal js a 40 per cent share in flat products in the US.

"Rumours and allegations of bribery in various deals may come to haunt Mittal's new-found position. ...[O]ne of his former executives alleged on a BBC show that Mittal paid $100 million in bribes for the Kazhak acquisition. ... none of the accusations has stuck." (Sahad P.V., "The King Steel," Business Today (India), 11/21/2004 )

Labor:

Unlike US Steel, whose pensions burden (covering 87,000 former employees) is estimated at Dollars 8bn, Mittal's International Steel Group has a pensions liability of almost nothing. (Peter Marsh, "Pensions taint steel groups," Financial Times 11/2/2004)

ISG is in this position because of its formation as a "shell" company in 2002. It took over the assets of US steel companies including LTV and Bethlehem which had entered bankruptcy, with their "legacy" costs wiped out.

Shortly after the merger with ISG, some job cuts were expected at Inland Steel - the Chicago-based company that became the main part of Mr Mittal's existing US steel operations, employing 6,700 - but Mr Mittal said these would not be significant and would be achieved by not replacing people who left.

Political influence:

Mr Mittal ran into a row over a L 125,000 Labour donation in 2001 just ahead of winning Tony Blair's backing for his bid for Romania's biggest steel maker.

Additional descriptive data

Major units/subsidiaries/affiliates:

The biggest part of Mr. Mittal's existing operations is LNM Holdings.

The private LNM Holdings, together with Rotterdam-based Ispat International, a public company controlled by the Mittal family, form the LNM Group - the umbrella name for all Mr Mittal's existing steel activities.

Most of LNM Holdings' steel activities are in low-wage countries such as Kazakhstan and South Africa where operating costs are a fraction of those in western Europe and the US.

Anything else

Anything Else:

In addition to steel production LNM owns substantial iron ore and coal deposits -- a significant advantage when demand for steel pushes raw material prices higher.

Aditya Mittal, President and annointed heir. Designated CFO.

Malay Mukherjee, COO, former general manager at Steel Authority of India's Bhilai plant. Rose to the top team as he successfully turned around the Karmet plant in Kazakhstan.

Rodney Mott, President & CEO/ ISG, CEO of Mittal Steel's combined US operations.

Sudhir Maheshwari, CFO/ LNM Holdings. Played an important role in all M&As since he joined the group in 1989 and has been the CFO of LNM Holdings since 1992.

Bhikam C. Agarwal, CFO/ Ispat International, Mittal's only listed company. 28 years of experience in steel and related industries.

Roeland Baan, CEO (Central & Eastern Europe)/ LNM Holdings. Joined in September 2004 as the CEO of LNM's Central and Eastern Europe operations, where the group is the largest steel producer (14 million metric tonnes).

L.N. Mittal managed to keep a relatively low profile until 2004, when he purchased a 15-bedroom mansion in the royal Kensington Palace Gardens. The mansion, previously owned by Formula One racing boss Bernie Ecclestone, was bought by Mittal for a whopping 57 million and includes underground parking for 20 cars. The wedding of his daughter, Vanisha, to Amit Bhatia, a London-based investment banker at Credit Suisse First Boston was held over six days in London and Paris, and cost $78 million. His wealth is estimated at $19 billion.