CASE STUDY ARCELOR-MITTAL MERGER: CHALLENGING INTEGRATION OF TWO STEEL GIANTS’ ORGANIZATIONAL IDENTITIES Preamble In the aftermath of one of this century's most remarkable mergers, we find two different cultures, two different worlds, thrown into one of history's largest corporate integrations. On the one hand, there is Mittal Steel - the largest producer of steel in terms of volume. Despite the fact that Mittal steel is based in Netherlands, it is perceived that the company is non-European because its CEO Lakshmi Mittal is Indian. On the other hand, there is Arcelor - headquartered in Luxembourg and created through the merger of three steel companies - Aceralia, Arbed and Usinor. In 2005, Arcelor had revenues of 32 billion Euros. Arcelor management was extremely hostile to Mittal Steel’s bid from the beginning because it believed that Arcelor itself would have been doing the acquisitions and not the other way around. Arcelor repeatedly played the patriotic card in order for shareholders to reject the bid. The CEO of Arcelor dismissed Mittal Steel as a “company of Indians” and unworthy of taking over a European company (all this despite the fact that most industry analysts and investment banks pointing out that the deal was in Arcelor’s best interests). The French government (despite not being a shareholder) was against the deal because of worries over its 28000 Arcelor employees. Despite repeated assurances from Mittal that the deal would not lead to layoffs the government of France was never convinced. The government of Luxembourg (a stakeholder) was against the deal as well for a variety of reasons. The European Union approved of the Mittal-Arcelor deal. So many questions, so many uncertainties, and only a few months to sort them all out and forge a new identity that will define the future of the steel industry worldwide. Will they succeed? At what cost? Questions to answer After reading (a) Chapter 2 about corporate governance and stakeholder management (pages 43-51) (b) Chapter 3 about vision, mission and strategic objectives (pages 58-63); (c) Chapter 5 on corporate strategy with a particular focus on mergers & acquisitions (pages 128-131); (d) the case (see below) you are asked to answer the following questions: 1. Discuss the motives and benefits of Mittal to acquire Arcelor. 1.a. What was Mittal’s corporate strategy? 1.b. Describe Mittal’s corporate culture (e.g., management style). 2. Discuss the motives and benefits of Arcelor to accept the merger with Mittal. 2.a. What was Arcelor’s corporate strategy? 2.b. Describe Arcelor’s corporate culture (e.g., management style, organizational routines).
3. Analyze the process of Arcelor-Mittal merger. What are the main steps undertaken in corporate acquisitions? 3.a. What was the French government reaction to Mittal’s bid on Arcelor? 3.b. Analyze how organizational identity issue was used in political discurse. 4. Analyze corporate culture of Arcelor-Mittal as a newly formed company. 4.a. Which company’s culture is dominant – Arcelor’s or Mittal’s? 4.b. List the divergences in the two companies. To your opinion, which of them are the current or potential sources of problems for the newly formed Arcelor-Mittal company? Why? 5. Analyze how successful was Arcelor-Mittal merger. What are the consequences for industry competition?
Mittal1 You may well know Lakshimi Mittal. His company is responsible for 10% of world steel output. He lives in 12-bedroom London mansion with butlers on call and a Picasso on the wall. And he famously dropped $55 million on his daughter’s wedding, which included a party at Versailles. Where the 56-year-old Lakshimi is the steel industry visionary, Aditya, his son, is the financial dealmaker. The smooth, Wharton-educated son pushed for the $38 billion takeover of Arcelor, the giant European steel company, then helped hammer out every aspect of the deal that closed last June. The question is whether the son is pushing the father too far....
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