S.P.

MANDALIS

R. A PODAR COLLEGE OF COMMERCE AND ECONOMICS MATUNGA, MUMBAI-400 019. A PROJECT REPORT ON Merger (Ar e!"r-M#$$%!& SUBMITTED B' A()%*()%r%$# A. G"+,%-# M.COM (SEM. I.&/ INTERNATIONAL MAR0ETING SUBMITTED TO UNI.ERSIT' OF MUMBAI 1012-1014 PROJECT GUIDE Pr"3. Mrs. Tejashree Patankar

ROLL NO/ 45

S.P. MANDALIS

R. A PODAR COLLEGE OF COMMERCE AND ECONOMICS MATUNGA, MUMBAI-400 019. CERTIFICATE

This is to certify that Mr. Abhaybharati A. Goswami of M.Com Business Management Semester IV !"#$%!"#&' has successfu((y com)(ete* the )roject on Merger (Ar e!"r-M#$$%!& un*er the gui*ance of Tejashree Patankar Pr"3. Mrs.

Course Co%or*inator Princi)a(

Dr. (Mr+& .#6#$% P#-7%!e .%+89e:%6 Dr.(Mr+& S)"(%6%

Project Gui*e+Interna( ,-aminer Prof. ............................ ,-terna( ,-aminer Prof. ............................

D%$e

Se%! "3 $)e C"!!ege

AC0NO;LEDGEMENT
I acknow(e*ge the /a(uab(e assistance )ro/i*e* by S. P Man*a(i0s 1. A. Po*ar Co((ege of Commerce 2 ,conomics3 for the two year PG course in M.Com. I s)ecia((y thank the Princi)a( 4r. Mrs' Shobana Vasu*e/an for a((owing us to use the faci(ities such as 5ibrary3 Com)uter 5aboratory3 internet etc. I sincere(y thank the M.Com Co%or*inator 4r. Mrs' Vinita Pim)a(e for gui*ing us in the right *irection to )re)are the )roject. I thank my gui*e Prof. Mrs. Tejashree Patankar 6ame of Gui*e' who has gi/en his+her /a(uab(e time3 know(e*ge an* gui*ance to com)(ete the )roject successfu((y in time. My fami(y an* )eers were great source of ins)iration throughout my )roject3 their su))ort is *ee)(y acknow(e*ge*.

Si gnature of the stu*ent

DECLARATION
I3 Abhaybharati A. Goswami of R. A. PODAR COLLEGE OF COMMERCE < ECONOMICS of M.Com S,M,ST,1 IV3 hereby *ec(are that I ha/e com)(ete* the )roject 7M,1G,1 A1C,581%MITTA5'0 in the aca*emic year !"#$%!"#&. The information submitte* is true an* origina( to the best of my know(e*ge.

Signature of the stu*ent

INDEX
Sr. No. Particulars Page No.

#. !.

Mitta( Stee( Arce(or

9 #$ 4

$. &. =. 9. :. <. >. #". ##. #!.

Initita( Bi* an* 1ejection ;osti(ity an* 1acism Increasing 8ffers an* Pressure Se/ersta( ? A 6ew P(ayer Agreement to Merger an* @ina( Merger Sna)shot View of the Merger Ain%Ain Transaction for a(( Stakeho(*ers @iner 4etai(s of Merger Conc(usion Bib(iogra)hy

#: #< #> !" !# !! !& != !> $!

BAC0GROUND

MITTAL STEEL Mitta( Stee( is the wor(*Bs (argest an* most g(oba( stee( com)any3 with shi)ments of &>.! mi((ion tons an* re/enues of o/er C!<.# bi((ion in !""=. They own stee(%making faci(ities in #9 countries3 s)anning four continents. They em)(oy !!&3""" )eo)(e s)anning &> *ifferent nationa(ities. Their shares are (iste* on the 6ew Dork an* Amster*am stock e-changes. Mitta( Stee( has set the )ace for the conso(i*ation an* g(oba(iEation of the wor(* stee( in*ustry. They ha/e taken on a range of acFuisitions3 many of them former(y )ub(ic sector%owne* com)anies3 an* ma*e successes of them. In the )rocess they ha/e s)rea* best )ractice an* mo*ern )ro*uction techniFues throughout their )(ants. Their ca)ita( in/estment )rogramme is unmatche* in the in*ustry. Their =""" strong customer base3 s)anning #=" countries3 inc(u*es househo(* names in the automoti/e3 engineering an* a))(iance sectors. A force in e/ery segment of the stee( market3 Mitta( Stee( )ro*uces a broa* range of high%Fua(ity finishe* an* semi%finishe* )ro*ucts for the f(at an* (ong )ro*ucts markets. Mitta( Stee( is among the most efficient stee( )ro*ucers in the wor(*. They encom)ass a(( as)ects of mo*ern stee(making3 combining both integrate* an* mini%mi(( faci(ities an* )ro*ucing much of the iron ore an* coking coa( use* in their furnaces. They are a(so among the most a*/ance* stee( makers3 o)erating a range of mo*ern techno(ogies. They ha/e )ioneere* the use of *irect re*uce* iron 41I' as a raw materia( source an* are now the wor(*0s biggest )ro*ucer of 41I. Aith two technica( research faci(ities3 their )ro*uct *e/e(o)ment teams are rea*y to meet the nee*s of the most *eman*ing customers.

BOARD OF DIRECTORS

5akshmi 6. Mitta(

Chairman of the Boar* of 4irectors an* Chief ,-ecuti/e 8fficer

A*itya Mitta(

Member of the Boar* of 4irectors an* Presi*ent an* Chief @inancia( 8fficer

Ai(bur 5. 1oss 6arayanan Vaghu( Ambassa*or 1oEenta( 1enG 5o)eE Muni Hrishna T. 1e**y 5ewis B. Ha*en Vanisha Mitta( Bhatia

Member of the Boar* of 4irectors Member of the Boar* of 4irectors

An*rGs Member of the Boar* of 4irectors

Member of the Boar* of 4irectors Member of the Boar* of 4irectors Member of the Boar* of 4irectors Member of the Boar* of 4irectors

LA0S=MI N. MITTAL > PROFILE Mr. 5akshmi 6. Mitta( is the Chairman an* C,8 of Mitta( Stee( Com)any. ;e foun*e* the com)any in #>:9 an* has been res)onsib(e for the strategic *irection an* *e/e(o)ment of its businesses. Mitta( Stee( is the on(y tru(y g(oba( stee( )ro*ucer in the wor(* with o)erations on #& countries3 s)anning & continents. Mr. Mitta(0s abi(ity to gui*e the com)any in its i*entification3 acFuisition an* turnaroun* of stee( assets has (e* to its emergence as one of the wor(*0s fastest growing stee( )ro*ucers. Mr. Mitta( began his career working in the fami(y0s stee(making business in In*ia3 an* has o/er $" years of e-)erience working in stee( an* re(ate* in*ustries. 8/er the years3 Mr. Mitta( has a(so cham)ione* the *e/e(o)ment of integrate* mini%mi((s an* the use of 4irect 1e*uce* Iron or I41IJ as a scra) substitute for stee(making an* (e* the conso(i*ation )rocess of the g(oba( stee( in*ustry. 8ther re(ate* acti/ities of Mitta( Stee( inc(u*e shi))ing3 )ower generation an* *istribution3 an* mining. 7

@o((owing the transaction combining Is)at Internationa( an* 56M ;o(*ings to form Mitta( Stee( in 4ecember !""&3 together with the simu(taneous announcement of the acFuisition of Internationa( Stee( Grou) in the KS to form the wor(*0s (argest stee( )ro*ucer3 Mr. Mitta( was awar*e* @ortune magaEines European Businessman of the Year 2004. Pre/ious(y3 he was awar*e* Steelmaker of the Year in #>>9 by 6ew Stee( in the KSA3 an* the Willy Korf Steel Vision Awar in Lune #>><3 for outstan*ing /ision3 entre)reneurshi)3 (ea*ershi) an* success in g(oba( stee( *e/e(o)ment from American Meta( Market an* PaineAeber0s Aor(* Stee( 4ynamics. Mr. Mitta( is an acti/e )hi(anthro)ist an* a member of /arious trusts. Mitta( Stee( is a significant contributor to (oca( community an* we(fare acti/ities for em)(oyees in countries where the Grou) o)erates. Mr. Mitta( is a member of the @oreign In/estment Counci( in HaEakhstan3 the Internationa( In/estment Counci( in South Africa3 the Aor(* ,conomic @orum0s Internationa( Business Counci( an* the Internationa( Iron an* Stee( Institute0s ,-ecuti/e Committee. ;e is a 4irector of ICICI Bank 5imite* an* is on the A*/isory Boar* of the He((ogg Schoo( of Management in the K.S.. ;e was born in Sa*u()ur in 1ajasthan3 In*ia on Lune #=3 #>="3 an* gra*uate* from St. Ma/ier0s Co((ege in Ca(cutta where he recei/e* a Bache(or of Commerce *egree. ;e is marrie* to Ksha Mitta(3 an* has a son3 A*itya Mitta( an* a *aughter3 Vanisha Mitta(.

MITTAL STEEL GRO;T= TIMELINE

'e%r A ?8#re9 19@9 Iron 2

De+ r#7$#"6 Stee( A mo*ern techno(ogica((y a*/ance* Stee( Com)(e-. 8f 1ename* as Caribbean Is)at. Me-ico0s Thir* 5argest Stee( Pro*ucer. 1ename* as Is)at Me-icana.

Com)any 1991 Trini*a* 2 Tobago Siba(sa

1994

Si*bec%4osco

Cana*a0s number four stee( maker is bought from the Go/ernment of Nuebec an* rename* Is)at Si*bec.

1995

;amburger Sta(werke Germany0s fourth (argest )ro*ucer of wire ro*3 renowne* for its mini%mi(( e-)ertise an* rename* as Is)at ;amburger Stah(werke. Harmet The Grou) buys a =.= mi((ion tons )a b(ast furnace stee( )(ant in HaEakhstan3 rename* Is)at Harmet.

199@

In(an* Com)any

Stee( Is)at In(an*.

Internationa(

buys

America0s

fourth

(argest

stee(maker3 In(an* Stee( Com)any an* renames it Is)at

1999

KnimGta(

Is)at Internationa( buys the @rench com)any3 Knimeta( Grou)3 inc(u*ing Trefi(euro)e an* SM13 from Ksinor.

1001

A5@ASI4

56M ;o(*ings buys :" )er cent of A5@ASI4 from the A(gerian go/ernment an* renames it Is)at Annaba.

SI4,M

56M ;o(*ings acFuires SI4,M3 an integrate* stee(works in Ga(ati3 being )ri/atiEe* by the 1omanian go/ernment. 1enames it Is)at Si*e-. 9

1001

Business agreement with Iscor

assistance 56M ;o(*ings signs a business assistance agreement with signe* the South African stee( )ro*ucer3 Iscor. 56M subseFuent(y takes contro( of Iscor in Lune !""&. Is)at Iscor has now been rename* Mitta( Stee( South Africa.

1002

6o/a ;ut

56M ;o(*ings signs an agreement to buy 6o/a ;ut3 the (argest stee( )ro*ucer in the CEech 1e)ub(ic3 from the CEech go/ernment. The acFuisition3 at an a((%in cost of C>"= mi((ion3 takes effect in Lanuary !""$ an* the com)any is rename* Is)at 6o/a ;ut.

1004

Po(ski ;uty Sta(i

56M ;o(*ings buys a contro((ing ho(*ing in Po(an*0s (ea*ing stee( )ro*ucer3 Po(skie ;uty Sta(i3 an* renames it Is)at Po(ska Sta( IPS'. The com)any boasts a ca)acity of o/er 9.= mi((ion tons a year but is c(ose to bankru)tcy at the time of acFuisition.

B; Stee(

56M ;o(*ings buys Bosnia0s B; Stee(3 committing itse(f to the biggest e/er in/estment in Bosnia by a foreign com)any.

Mace*onian faci(ities 56M a**s to its *ownstream acti/ities in the Ba(kans with from Ba(kan Stee( the acFuisition of hot an* co(* ro((ing mi((s in Sko)je3 Mace*onia. The two mi((s3 *ormant for two years3 are rename* Is)at Sko)je. Creation 8f Mitta( 56M ;o(*ings an* Is)at Internationa( announce their Stee( an* Pro)ose* merger % to form Mitta( Stee(. At the same time3 Mitta( AcFuisition Internationa( Stee(. 8f Stee( announces an agree* takeo/er of Internationa( Stee( Grou) of the KS in a cash an* shares *ea( worth C&.= 10

bi((ion. 8nce the )ro)ose* acFuisition is com)(ete*3 it wi(( create the wor(*0s (argest stee( maker with a stock market worth of aroun* C!# bi((ion an* a combine* ca)acity of :" mi((ion tons of stee( a year. The en(arge* Mitta( Stee( wi(( s)an the g(obe with aroun* $" )er cent of its assets in 6orth America3 $" )er cent in ,uro)e an* the remaining &" )er cent s)(it between Asia an* Africa. Chairman 5akshmi Mitta( *ec(ares his intention to make the Grou) 7the (owest cost stee( )ro*ucer in e/ery market.0

1005

AcFuisition of stake Mitta( Stee( announces a share )urchase agreement to in ;unan Va(in acFuire $9.9: )er cent of ;unan Va(in Stee( Tube 2 Aire3 one of China0s to) ten stee(makers with annua( ca)acity of <.= mi((ion tonnes. The mo/e marks Mitta( Stee(0s entry into the Chinese stee( in*ustry. ISG AcFuisition The acFuisition of ISG is com)(ete* an* the com)any is merge* with Mitta( Stee(0s e-isting KS o)eration3 Is)at In(an*3 an* subseFuent(y re%name* Mitta( Stee( KSA. Mitta( Stee( ,uro)e Mitta( Stee( restructures its ,uro)ean business3 merging its Create* western ,uro)ean o)erations with its centra( an* eastern ,uro)ean o)erations to form one unifie* business structure ? Mitta( Stee( ,uro)e. M4A with 5iberian Mitta( Stee( signs a mining *e/e(o)ment agreement with Go/t. the Go/ernment of 5iberia3 gi/ing Mitta( Stee( access to about one bi((ion tonnes of iron ore resources in the west of the country. AcFuisition of Hry/oriEhsta( is acFuire* for C&.< bi((ion fo((owing a 11

Com)(ete*

Hry/oriEhsta(

)ub(ic auction in Hie/. Hry/oriEhsta( is Kkraine0s (ea*ing stee(maker with annua( stee( )ro*uction of :.: mi((ion tonnes an* more than one bi((ion tonnes of iron ore resources. Com)any subseFuent(y rename* Mitta( Stee( Hry/iy 1ih.

M8K Lharkhan*3 In*ia

with Mitta( Stee( signs a Memoran*um of Kn*erstan*ing with the State of Lharkhan*3 In*ia. Mitta( Stee( e-)ects to in/est C> bi((ion estab(ishing mining an* stee( making o)erations in the state.

AcFuisition of Ste(co Mitta( Cana*a enters into *efiniti/e agreement for the subsi*iaries acFuisition of 6orambar Inc.3 Ste(fi( 5tGe an* Ste(wire 5t*. from Ste(co Inc. Transaction com)(ete* in @ebruary !""9 at a cost of CC$" mi((ion

ARCELOR Arce(or was create* by the merger of Acera(ia3 Arbe* an* Ksinor3 an* the *etermination of these three ,uro)ean grou)s to mobi(ise their technica(3 in*ustria(3 an* commercia( 12

synergies in a joint /enture to create a g(oba( (ea*er with the ambition of becoming a major )(ayer in the stee( in*ustry. 8fficia((y (aunche* on @ebruary #>3 !""#3 the merger became effecti/e on @ebruary #<3 !""!3 when the Arce(or share was (iste* on se/era( stock e-changes. The choice of the name Arce(or was announce* on 4ecember #!3 !""#.

ACERALIA #>"! O Creation of A;V #>=" O Creation of ,6SI4,SA #>:$ O ,6SI4,SA absor)tion of K6I6SA' #>># O ,stab(ishment of C81P81ACI86 *e (a SI4,1K1GIA I6T,G1A5 #>>& O ,stab(ishment of CSI Cor)oracion Si*erurgica3 by uti(iEing the )rofitab(e assets of Cor)oracion *e (a Si*erurgia Integra(. 8)erations begin in #>>=. #>>: O Creation of AC,1A5IA C81P81ACI86 SI4,1K1GICA an* strategic a((iance with the Arbe* Grou).

13

ARBED

#<<! O ,stab(ishment of the )arent com)any #<<9 O Beginning of Thomas stee( )ro*uction in 5u-embourg #>## O Merger of the $ (argest stee(makers in 5u-embourg an* creation of Arbe* #>!" O Creation of Tra*eA1B,4 #>!! O Creation of Cia Si*erurgica Be(go%Mineira in BraEi( #>9! O Creation of SI4MA1 in Be(gium #><= O Majority shareho(*ing in A5P through SI4MA1 #>>! O Contro( is taken of the former Ma-hQtte e-%G41' an* estab(ishment of Stah(werk ThQringen #>>$ O 8rganiEation of the Grou) in business sectors #>>$+>: O Con/ersion to e(ectric stee( )ro*uction in 5u-embourg #>>= O Majority shareho(*ing in H(Rckner Stah(3 now STA;5werke B1,M,6 #>>: O Strategic )artnershi) with AC,1A5IA former(y CSI' in S)ain #>>< O Integration of A1IST1AI6 in S)ain % Majority shareho(*ing in Be(go%Mineira #>>> O Takeo/er of KCI6 in S)ain !""" O Sa(e of the shareho(*ing in Samitri

USINOR

14

#>&<O Creation of Ksinor3 which takes o/er from @orges et AciGries *u 6or* et *e (B,st an* ;auts @ourneau-3 @orges et AciGries *e 4enain%AnEin #>&< O Creation of So((ac3 which takes o/er from the 5orraine stee( in*ustry #>9& O Creation of Saci(or3 the origin of which *ates back to the Aen*e( grou) #><# O 6ationa(iEation of Ksinor an* Saci(or #><9 O Merger of Ksinor an* Saci(or #>>" O So((ac absorbe* by Ksinor #>># O Kgine absorbe* by Saci(or #>>& O S)ecia( stee(s grou)e* together within the Aster ho(*ing com)any #>>= O Pri/atiEation of Ksinor%Saci(or #>>: O Ksinor%Saci(or becomes Ksinor #>>< O AcFuisition of Cockeri((%Sambre3 owner of ,H8 Stah( #>>> O 1e%organiEation of the Ksinor grou)

15

BOARD OF DIRECTORS

Lose)h Hinsch LosG 1amSn T(/areE 1en*ue(es

Chairman of the Boar* of 4irectors Vice%Chairman of the Boar* of 4irectors

;.1.;. Prince Gui((aume of 5u-embourg Lohn Castegnaro Lean%D/es 4urance 6oU( @orgear* Lean%Pierre ;ansen K(rich ;artmann

4irector 4irector 4irector 4irector 4irector 4irector

Cor)oraciSn LMAC BV re)resente* by Antoine 4irector S)i((mann ;e*wig 4e Hoker Manue( @ernVn*eE 5S)eE Miche( Marti 4anie( Me(in ,*mon* Pachura @rancisco La/ier *e (a 1i/a Garriga Sergio Si(/a *e @reitas Georges Schmit @ernan* Aagner 4irector 4irector 4irector 4irector 4irector 4irector 4irector 4irector 4irector

16

T=E INITIAL BID AND T=E REJECTION

J%68%r* 14/ 56 Mitta( ta(ke* to Arce(or C,8 Guy 4o((e about the )ossibi(ity of Mitta( Stee( acFuiring Arce(or. Guy 4o((e categorica((y turns Mitta( *own. J%68%r* 1A/ Mitta( Stee( (aunches a forma( takeo/er bi* for C!! bi((ion *o((ars. J%68%r* 19/ Arce(or rejecte* the offer an* the @rench go/ernment sai* it has Wgreat concernsW about the merger. Arce(or has )(ants in @rance. The market sent Arce(orBs Paris%(iste* shares soaring !>X3 to ,K18 !<.9. Mitta( shares (iste* in Amster*am c(ose* u) 9.!X3 at ,K18 !:.9$. Stee( shares aroun* the wor(* a(so rose. Mitta( sai* that Arce(or Chief ,-ecuti/e Guy 4o((e wasnBt )ositi/e about the a))roach3 but he was confi*ent Arce(orBs shareho(*ers wi(( back the bi*. A tie%u) between the two com)anies wou(* create a com)any with C:" bi((ion a year in re/enue an* the most g(oba( )ro*uction ca)acity in the in*ustry. Arce(or is )rimari(y a ,uro)ean )ro*ucer whi(e Mitta( is scattere* aroun* the g(obe. The ne-t (argest )ro*ucers after Mitta( an* Arce(or are 6i))on Stee( Cor) an* Posco. Mitta( wou(* become the (ea*er in )ro/i*ing stee( to the automoti/e in*ustry in ,uro)e an* the K.S.3 an* wou(* (ea* in the 6orth American @ree Tra*e Area in a))(iances an* )ackaging. 17

=OSTILIT' AND RACISM

There was a (ot of hosti(ity by Arce(or0s Management Boar* as they fe(t that Mitta( Stee( was resorting to un*erhan*e* techniFues to merge with them. They *ismisse* the i*ea of a merger with a Wcom)any of In*iansW. The ,uro)ean Knion sai* it was against racia( *iscrimination an* the issue wou(* be treate* on(y on commercia( consi*erations. There was a (ot of contro/ersy where racist remarks were ma*e against 56 Mitta(. The bi* stirre* u) )assions amongst )o(iticians3 other (ea*ers3 an* common man. Aith the ,uro)ean Commission being accuse* of )rotectionism an* racism3 Arce(orBs C,83 Guy 4o((e3 offere* a (aun*ry (ist of i((s in Mitta( Stee( because of which the merger shou(* not take )(ace. In 5on*on3 a co(umnist for !he "uar ian s)oke of how the bi* un(eashe* a new wa/e of Beconomic )atriotism3B a**ing that Mitta( an* his fami(y were often )ortraye* as a(iens %% Bthe In*iansB %% rather than as g(oba( entre)reneurs.

18

INCREASING OFFERS AND PRESSURE A7r#! 19O Mitta( Chairman an* Chief ,-ecuti/e 5akshmi Mitta( ca((s Arce(or Chairman Lose)h Hinsch to ask for Wfrien*(y *iscussionsBB about re/ising his )ro)osa( in return for su))ort from management. A7r#! 1@O Mitta( te((s Hinsch he is rea*y to make Wsignificant cor)orate go/ernance changesBB an* re/ise the offer. M%* 4O Hinsch says the offer is Wwho((y ina*eFuateBB an* Arce(or has significant concerns about the rea( /a(ue of Mitta( shares. M%* 9O Mitta( Stee( says it is rea*y to re/ise the offer an* make cor)orate go/ernance changes Win the e/ent of a recommen*e* *ea(.BB M%* 10O Arce(or Chief ,-ecuti/e Guy 4o((e *escribes as WinsufficientBB3 Mitta(Bs offer to re/ise its bi*. M%* 11O Arce(or says it has fi(e* a (awsuit in the Knite* States against Mitta( for co)ying a ty)e of stee( for the auto in*ustry. M%* 11O Both com)anies announce better%than%e-)ecte* resu(ts3 a(though )rofits suffer *ue to higher costs of raw materia(s. Arce(or toughens its stance3 announcing )(an to s)en* u) to C>.= bi((ion to buy back a(most a Fuarter of its shares. M%* 1@O Mitta( forma((y (aunches its offer. M%* 19O Mitta( raises its offer by $& )ercent3 bringing it u) to C$!.>" bi((ion an* says it wou(* re*uce the Mitta( fami(yBs stake in the com)any. 19

SE.ERSTAL > A NE; PLA'ER Se/ersta( is a 1ussian com)any main(y o)erating in the stee( in*ustry3 centere* in the northern city of Chere)o/ets. As such it is the secon* (argest stee( com)any in 1ussia3 behin* ,/raE Grou). The com)any is owne* by A(e-ei Mor*asho/. M%* 14O Arce(or announces a *ea( with Se/ersta( that wi(( gi/e it a contro((ing stake in 1ussiaBs stee(maker an* C#9.& bi((ion for $! )ercent of Arce(or. J86e 1O ,uro)ean Knion antitrust regu(ators a))ro/e Mitta( bi* on con*ition the new combine* stee( giant se(( off some of its faci(ities if the bi* succee*s. J86e 4O The ,uro)ean Commission a))ro/e* the Mitta(%Arce(or merger. J86e 9O Arce(or confirms it has he(* ta(ks with Mitta( on the term of its bi*. J86e 11O Arce(or rejects Mitta( re/ise* bi* an* recommen*s shareho(*ers acce)t *ea( with Se/ersta(. Arce(or says the re/ise* offer sti(( un*er/a(ues the com)any an* urges shareho(*ers to su))ort the Se/ersta( merger instea*3 but man*ates its boar* to e-)(ore )ossib(e im)ro/ements to the Mitta( offer at a (ater *ate. Mitta( says it wonBt bu*ge on )rice3 but is )re)are* to make changes re(ate* to cor)orate go/ernance. J86e 10/ In a bi* to woo Arce(or3 Se/ersta( re/ise* the terms of its merger )ro)osa(3 saying that majority owner Mr A(e-ei Mor*asho/ wou(* sett(e for != )er cent of the new grou) rather than the initia((y )ro)ose* $!.$ )er cent an* raise* its offer by about ! bi((ion.

20

AGREEMENT TO MERGER AND FINAL MERGER J86e 19O Arce(or cance(s shareho(*er meeting on share buyback ami* growing shareho(*er o))osition. J86e 11O Market regu(ators in @rance3 S)ain3 5u-embourg an* Be(gium sus)en* Arce(or shares3 saying they want more c(arity on the state of ta(ks with Mitta( an* Se/ersta(. J86e 14/ Ta(ks on between Mitta( Stee( an* Arce(or J86e 15O Arce(orBs boar* agrees to sweetene* bi* from Mitta( worth about C$!.$ bi((ion. J86e 20/ Pa/ing the way for a merger between Arce(or an* Mitta( Stee(3 an o/erwhe(ming majority of shareho(*ers of the 5u-embourg%base* firm /ote *own a merger )ro)osa( from 1ussiaBs Se/ersta(. =:.>=X )er cent of Arce(or shareho(*ers /ote* against the Se/ersta( offer. In the )rocess3 they acce)t Mitta( Stee(Bs C$!.$ bi((ion offer3 which was a))ro/e* by the Boar* of Arce(or on Lune != after a fi/e%month (ong batt(e. Arce(or ha* recommen*e* acce)tance of share an* cash from Mitta( Stee( /a(uing at about C$!.$ bi((ion3 which creates a grou) with $3!"3""" em)(oyees )ro*ucing about ##9 mi((ion tonnes of stee( annua((y3 accounting for about #"X of the wor(* market. Arce(or chairman Lose)h Hinsch to(* shareho(*ers that the (ong fight with Mitta( was worth it3 saying the In*ia%born stee( tycoon 5 6 Mitta( an* the markets ha* fina((y recognise* Arce(orBs Wtrue /a(ue.W WAe ha/e create* in fi/e months more than ,K18 #! bi((ion in /a(ue3W Hinsch sai*. 21

SNAPS=OT .IE; OF T=E MERGER

TRANSACTION =IG=LIG=TS Y Arce(or Mitta(O A merger of eFua(s with share* management for successfu( integration ? 8wnershi) of =".=X for Arce(or in/estors an* &>.=X for Mitta( Stee( in/estors Y 1ecommen*e* transformationa( merger of the wor(*0s two (argest stee( com)anies with unri/a((e* g(oba( foot)rint Y The un*is)ute* in*ustry (ea*er Y Creation of com)any with un)rece*ente* sca(e an* *i/ersification to manage cyc(ica(ity3 stabi(iEe earnings an* increase shareho(*er returns Y Annua( synergies increase* by 9"X to Z#.$bn KSC#.9bn'

T=E COMBINED .ISION Combination *ri/en by sim)(e an* com)e((ing in*ustria( (ogic3 s)urring conso(i*ation in a fragmente* in*ustry Creation of ,uro)ean%base* g(oba( cham)ion best )ositione* to ca)ture new market o))ortunities 6ew entity wi(( ca)ita(ise on strong ,uro)ean heritage an* )resence3 as 22

we(( as (ea*ing )osition in 6orth America ,njoy un)ara((e(e* access to new high%growth marketsO Centra( an* ,astern ,uro)e3 Africa3 China an* 5atin America Com)any wi(( be ab(e to ser/ice g(oba( customers with broa* an* *ee) )ro*uct offering ;igh (e/e( of *irect access to raw materia(s making grou) more )rofitab(e an* (ess cyc(ica( than most of its )eers

T=E COMBINED STRATEG' Conso(i*ate regiona( high%en* (ea*ershi) into g(oba( customer )(atform Achie/e in*ustria( e-ce((ence through state of the art assets sustaine* by soun* ca)ita( e-)en*iture an* best in c(ass 124 1ea(ise commercia( (ea*ershi) through strong *istribution channe(s Ca)ture growth in B1IC,T countries3 uti(ising e-isting (ea*ershi) in high%en* )ro*ucts in mature economies Acce(erate growth in key emerging markets such as In*ia an* China Achie/e cost (ea*ershi) an* o)erationa( e-ce((ence across )ro*uct range Maintain high (e/e( of /ertica( integration to he*ge against raw materia(s )rice f(uctuations @ocus on )eo)(e management an* socia( res)onsibi(ity

23

A ;IN-;IN TRANSACTION FOR ALL STA0E=OLDERS Fr"- M#$$%! P"#6$ O3 .#e, Merger wou(* take conso(i*ation to a new horiEon. Successfu( *istribution business in ,uro)e. Mitta( Co. to ha/e (ea*ershi) )osition in high en* segments in Aestern ,uro)e with strong 124 ca)abi(ities. 5ow Cost s(ab manufacturing in BraEi( that can be e-)an*e* for e-)ort to ,uro)e an* 6orth America. Increase* free f(oat an* (iFui*ity

Fr"- Ar e!"r P"#6$ O3 .#e, Mitta( Com)any wi(( accom)(ish Arce(or0s state* )(an in the most efficient way. Arce(or becomes a g(oba( )(ayer. 8)erations in high%growth economies with (ow%cost3 )rofitab(e assets an* (oca( o)erating e-)ertise in numerous emerging markets. 5ea*ershi) )osition in high%en* segments in 6orth America3 with strong 124 ca)abi(ities. Access to /ery (ow cost s(ab )otentia( in Kkraine to ser/e Aest ,uro)e. Access to raw materia(s an* u)stream integration.

24

FINER DETAILS OF MERGER S)%re)"!9er :"$#6g r#g)$+ A(( shares with i*entica( /oting an* economic rightsO 8ne share % one /ote regar*(ess of ho(*ing )erio* C"-7"+#$#"6 "3 #6#$#%! B"%r9 "3 D#re $"r+ o Mr Hinsch to be Chairman3 Mr Mitta( to be Presi*ent o K)on Mr Hinsch0s retirement3 Mr Mitta( becomes Chairman o The Boar* of 4irectors wi(( be com)ose* of #< members3 a(( non e-ecuti/e majority in*e)en*ent' Y 9 members from Arce(or Y 9 members from Mitta( Stee( Y $ current re)resentati/es of e-isting Arce(or major shareho(*ers Y $ em)(oyee re)resentati/es o After e-)iry of three year )erio*3 shareho(*ers to e(ect Boar* of 4irectors B"%r9 C"--#$$ee+ o an Au*it Committee com)ose* so(e(y of in*e)en*ent *irectors o an A))ointments an* 1emuneration Committee com)ose* of & members3 inc(u*ing the Chairman3 Presi*ent an* ! in*e)en*ent *irectors C"-7"+#$#"6 "3 M%6%ge-e6$ B"%r9 o The Management Boar* wi(( be com)rise* of : e-ecuti/e members o & current Arce(or e-ecuti/es3 C,8 to be )ro)ose* by the Chairman o $ Mitta( Stee( e-ecuti/es

25

0E' CONTRACT TERMS O$)er "33er+

Arce(or has agree* they wi(( acce)t no other offer for Arce(or shares un(ess it is a su)erior offer for the entire share ca)ita( of Arce(or o 6o break%u) fee reFuire* in contract o If shares are issue* un*er the Strategic A((iance Agreement3 cor)orate go/ernance ru(es an* certain other con*itions terminate S$%69+$#!!

Mitta( fami(y has agree* to a stan*sti(( at &=X of share ca)ita(. ,-ce)tions in certain circumstances % consent of a majority of the in*e)en*ent *irectors or in case of )assi/e crossing of such thresho(*s L" B 87

Mitta( fami(y has agree* to a =%year (ock%u)3 subject to certain e-ce)tions3 inc(u*ing the right to *is)ose of u) to =X of the share ca)ita( after the !n* year

INCREASED IDENTIFIED S'NERGIES M%rBe$#6g %69 $r%9#6g (USC5A0-& Y Acce(erate* growth of *istribution in *e/e(o)ing regions e.g.3 C,,3 CIS3 Africa Y Cross se((ing through en(arge* an* enhance* )ro*uct )ortfo(io Y 8)timisation of or*er book for cross )ro*uct f(ows an* (ogistica( sa/ings M%683% $8r#6g %69 7r" e++ "7$#-#D%$#"6 (USC4A0-& 26

Y Benchmarking an* best )ractice a(ignment across a(( o)erating assets Y 8)timisation of uti(isation of assets through se(ecte* mi(( )ro*uct s)ecia(isation e.g.3 )ro*ucti/ity gains with better seFuencing rates3 fewer changeo/ers' Y 5ogistica( an* mi(( o)timisation through transfers of semi finishe* )ro*ucts P8r )%+#6g (USC500-& Y Sca(e effects on stan*ar*isation of )rocurement contracts Y 8)timisation an* efficiencies from maintenance ser/ices3 subcontracting3 s)are )arts an* consumab(es Y 5ogistics sa/ings on o)timisation of raw materia( f(ows SGA (USC40-& Y IT synergies Y 1e*uction in e-terna( contracts e.g.3 consu(ting ser/ices Y 4u)(ication in commercia( network a/oi*e*

27

UNMATC=ED FINANCIAL STRENGT=

Ar e!"r M#$$%! 7r"-3"r-% Be* 3#6%6 #%!+ 1e/enue !""= ,BIT4A !""= Margin X' 6et 4ebt N#%"9 [ Gearing 6et 4ebt + ,BIT4A Cash f(ow from o)erations !""= Ca)e- !""= @ree cash f(ow !""=

Ar e!"r M#$$%! (USC(6& KSC::.&bn KSC#&.&bn #<.9X KSC!&."bn =9X #.:KSC>.:bn KSC&.#bn KSC=.9bn

FINANCIAL CREATION

POLIC'

FOR

SUSTAINABLE

S=ARE=OLDER

.ALUE

,fficient ca)ita( structure an* return of e-cess cash to shareho(*ers $"X *i/i*en* )ayout ratio o/er the cyc(e Kn)ara((e(e* financia( f(e-ibi(ity to )ursue interna( an* e-terna( growth o))ortunities Commitment to in/estment gra*e cre*it rating Maintain high returns on ca)ita(

28

CONCLUSION The (argest stee( com)any in the wor(* is create*3 a com)any (arger than the ne-t $ (argest stee( com)anies combine*. Accor*ing to the )ress re(eases issue* by the com)anies3 IConso(i*ation creates /a(ue in the stee( in*ustryJ. Arce(or is the number # stee( )ro*ucer in the wor(* by re/enue. Mitta( is the number # stee( )ro*ucer in the wor(* by shi)ments. Y Both com)anies ha/e been (ea*ers in stee( in*ustry conso(i*ation Y Conso(i*ation is contributing to increase* *isci)(ine by )ro*ucers Y Combination of to) two )(ayers takes conso(i*ation to a new (e/e( Arce(or is )rimari(y a ,uro)ean )(ayer3 whi(e Mitta( has interests a(( aroun* the wor(*. Together3 they form Y Aor(*0s number # stee( com)any Y 5ea*ing )ositions in = major markets Y 9# )(ants Y !: countries Y 6umerous internationa( )artnershi)s an* Loint Ventures Y 8))ortunity to grow in China an* In*ia The new com)any is number # in 6orth America3 South America3 Africa3 Aestern ,uro)e3 ,astern ,uro)e an* CIS countries. A /ery /ita( omission from this (ist is Asia an* more im)ortant(y3 56 Mitta(0s home country3 In*ia. Ahy has 56 Mitta( not concentrate* on In*ia so far\ 8ne can s)ecu(ate that he was going at it ste) by ste)3 conFuering the wor(* markets one by one an* now3 on(y In*ia is (eft. Ti(( now3 he has shown /irtua((y no interest in the In*ian market. 29

1ecent(y3 he has shown interest in in/esting (arge amounts of money in Lharkhan* an* 8rissa3 amounting to about 1s. &"3""" crore. 5ogica((y his ne-t sto) wou(* be Asia3 as China an* In*ia are the fastest growing stee( consum)tion markets. In !""=3 the KS witnesse* a #=.&X fa(( in consum)tion3 an* the fa(( in ,K was ##.:X. Tota( g(oba( consum)tion sti(( manage* to rise =.$X3 thanks to a massi/e !=.>X rise in *eman* in China an* an im)ressi/e :%<X *eman* in In*ia. Some ana(ysts say that Mitta( ha* to )ay a much higher )rice than was actua((y reFuire* to merge with Arce(or. ;e a(so *i* not get the best *ea( that he cou(* ha/e3 as his contro((ing stake in the new(y forme* Arce(or%Mitta( is (ower than what was origina((y aime* for. Mitta( Stee( is the wor(*Bs (argest stee( )ro*ucer at :" mi((ion tonnes a year3 a(most *oub(e the wor(*Bs secon* (argest )ro*ucer % Arce(or. 8ctober !""= saw the first batt(e between the big two% Mitta( an* Arce(or3 both bi* for KkraineBs (argest stee( mi(( % Hry/oriEhsta( in an o)en te(e/ise* bi*. Mitta( beat Arce(or to the C&.< bi((ion *ea(3 much more than the C$ bi((ion at what ana(ysts ha* /a(ue* Hry/oriEhsta(. 1e)orts suggest that it was this bi**ing war with Arce(or that ga/e 5 6 Mitta(Bs son A*itya3 the C@8 of Mitta( Stee(3 the i*ea of taking o/er Arce(or. ;is reason was that it wou(* e(iminate any future messy batt(es. Ahy was the *ea( so im)ortant for 56 Mitta(\ In a sna)shot3 the Mitta(%Arce(or combine wou(* ha/e an e/en (arger share of the g(oba( stee( market an* wou(* be ab(e to get a better gri) o/er stee( )ricing. Se/ersta( ha* to be )ai* (ega( fees as they ha* been com)(ete(y cut out of the *ea(. 6ow Se/ersta( has threatene* a (ega( batt(e an* a fresh bi*. If that ha))ens3 the imme*iate future3 at (east3 wi(( not be g(inting enough to Mitta(0s a*/antage. It has been a win%win transaction for both )arties. 30

Y Creating the un*is)ute* (ea*ing g(oba( stee( com)any Y Growth an* /a(ue creation o))ortunities ma-imise* through uniFue g(oba( )(atform Y Ste) change in stee( in*ustry conso(i*ation Y Significant synergy )otentia( Y @inancia( strength an* strategic f(e-ibi(ity reinforce* Y 5ea*ershi) in 124+)ro*uct *e/e(o)ment Y Significant free f(oat an* (iFui*ity Y 1e%rating )otentia( Y Positi/e for a(( stakeho(*ers

#n the en $ a European %ompany ha to finally &i'e in an mer&e with a %ompany of #n ians(

31

BIBLIOGRAP=' htt)O++www.mitta(stee(.com+Com)any+;istory+ htt)O++www.mitta(stee(.com+Com)any+Profi(e.htm htt)O++www.mitta(stee(.com+Com)any+Management+ htt)O++www.mitta(stee(.com+6ews]an*]Press+Press]Conferences]an*]Presentations.htm htt)O++www.arce(or.com+in*e-.)h)\(ang^en2)age^:: htt)O++sg.biE.yahoo.com+"9"#!:+#=+$y>b=.htm( htt)O++www.nytimes.com+!""9+"9+!9+business+wor(*business+!9arce(or.htm(\ e-^#$"<>:&&""2en^<abefaa$&!#:b*9f2ei^="<<2)artner^rssnyt2emc^rss htt)O++economictimes.in*iatimes.com+artic(eshow+#9<=:#:.cms htt)O++in.re*iff.com+money+!""9+feb+#=msg#.htm htt)O++www.eitb!&.com+)orta(+eitb!&+noticia+en+business+factbo-%time(ine%of%mitta(s% takeo/er%bi*%for%stee(%ri/a(%arce(or\itemI*^4$>9>=2c(^ X!@eitb!&X!@economia2i*ioma^en htt)O++www.b(onnet.com+!""9+"9+!9+stories+!""9"9!9"$$$"#"".htm htt)O++www.Eeenews.com+artic(es.as)\re)^!2ai*^$"&<>&2si*^BKS2ssi*^=$ htt)O++www.stain(ess%stee(%wor(*.net+misc+ShowPage.as)-\)ageI4^99& htt)O++in.re*iff.com+money+!""9+jun+$"mitta(.htm 32