Mittal Steel merged Arcelor
A merger occurs when two companies combine to form a distinct company. A merger is very similar to an acquisition or takeover, except that in the case of a merger existing stockholders of both companies involved keep hold of a shared interest in the new company. When combining two or more companies in order to become one. Generally, by offering the stockholders of one company, securities in the acquiring company in exchange for the surrender of their stock. Since majority of mergers do not succeed, they are usually kept as a secret from the general public till its process is completed and often from the majority of employees.
Types of mergers
This merger involves the combining of two companies that are in direct competition with one another. In other words, they are trying to sell the same product to customers who are in a common market. Vertical Merger
This type of merger involves a customer and a company or a supplier and a company merging. Imagine a baseball bat company merging with a wood production company. This would be an example of the supplier merging with the producer and is the essence of vertical mergers. Market-extension Merger
This involves the combination of two companies that sell the same products in different markets. A market-extension merger allows for the market that can be reached to become larger and is the basis for the name of the merger.
This merger is between two companies that sell unlike products, but somewhat linked products, in a common market. This allows the new, larger company to pool their products and sell them with greater success to the already common market that the two separate companies shared. Conglomeration
A conglomeration is one of type the merger of two companies that have no correlated products or markets. In short, they have no familiar business ties.
The introduction to the business
In this part, I am going to introduce the merger company, ArcelorMittal Company and give a short introduction of Mittal Steel Company, Arcelor Steel Company which is the founding companies of the ArcelorMittal. Before I introduce the ArcelorMittal Company, it is necessary to know the background of two companies.In 2004, LNM Holdings N.V (Netherland) and Ispat International (India) merger and formed new company named Mittle Steel Company. The owner of Ispat International, Mr.lakshmi N. Mittal, was the president of new company. The headquarter was in Netherland. At that time, it was one of the largest steel manufactures(Wikipedia, 2009). Their factories were located in 16 countries spanning 4 continents and employ 224.000 staff. In 2005 they produced 49.1 million tones, turnover of 28.1 billion(Ispat, 2006) Arcelor was created in 18 February 2002, by merger of three former steel companies, one is Aceralia Company which was founded in 1911, Spain. Second is Usinor Company which was founded in 1948, France. Last is Arbed Company, in 1902, Luxembourg. It is another one of the largest steel companies in the world(Wikipedia, 2009) . They revenue of 32.6 Billion, produced 46.7 million tones of crude steel (Wikipedia, 2009), and on the July 25th,2005 Arcelor is NO.1 in the industry steel area and 118th listed among Fortune 500 company (Fortune500, 2005). In 2006 January, Mittal made surprise 18.6 billion bid for Arcel.after that, Arcelor management announced large dividend, made very positive profit report and good forecast for future performance.after that Arcelor annonuced to make 13 billion deal with Severstal of Russia, including break-up fee of 140 million and reject Mittal offer. Then Mittal raises offer to 26.5 billion, and agreed to cede some management control and family voting rights. The interest is that there present big difference between Acelor’s insititution shareholder and Acelor management. More than 50% of shareholders manted to meet manager of...
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