Ispat International, the steel producer controlled by the Indian billionaire
Lakshmi Mittal, has agreed to buy LNM Holdings and International Steel
Group in a deal that will create the world's largest steelmaker.
"The combined Mittal Steel will be the largest and most global steel company in
the world and will be listed on the New York Stock Exchange and Euronext
Amsterdam," the company said this afternoon.
Under the terms of the merger, Ispat will issue new shares with a value of
around $13 billion (£7bn) at Fridy's closing price to LNM Holdings,
with the combined company forming Mittal Steel.
Mittal Steel will then launch a cash and shares offer for ISG, valuing the US
steelmaker at around $4.5 billion.
Mr Mittal has championed consolidation in the global steel market, which has
recently benefitted from surging prices on the back of Chinese demand.
Merger activity has also helped to create companies with greater pricing power.
Arcelor, the Luxemborg-based producer that was the largest in the world until
today's Mittal deal, was created when three European steel companies came
together in 2002.
Speaking at a steel conference last month, Mr Mittal said: "I'd love to see a
situation over the next decade where th three biggest companies account for 20
per cent of world output, rather than 10 per cent now."
Ispat said it estimates 2004 sales for the new entity of over $31.5 billion on
total steel shipments of 57 million tons. Production capacity of the new
company is estimated at 70 million tons. Operating profit is expected at around
$6.8 billion to $7 billion.
The International Iron and Steel Institute said last week that world crude steel
production for the 62 countries that report to it stood at 763 million tons for
the first nine months of the year, 8.7 per cent higher than for the same
period in 2003.
Arcelor's chief executive, Guy Dolle, welcomed the planned merger as a further
sign of consolidation in the sector.
"We welcome this news, which contributes to the consolidation of the steel
industry, which is still fragmented," he said.
"This merger supports our long-term vision of the industry, which in five to 10
years will be led by five or six global groups, each producing 80 to 100
million tons of steel," he added.
Ispat and LNM Holdings already form part of the LNM Group, which is controlled
by Mr Mittal. The Indian businessman already holds controlling stakes in Ispat
and LNM Holdings and is chairman of both companies.
Ispat said it had formed a special committee of independent directors to
evaluate the deal for minority shareholders. The committee has unanimously
approved the offer.
LNM will pay a dividend of $2 billion before closing the deal, leaving it with
an estimated cash position of $100 million at the end of this year.
Mr Mittal will become chairman and chief executive of the new company, with the
ISG chief executive, Rodney Mott, heading the US operations. Wilbur Ross, the
chairman of ISG, will become a board member of Mittal Steel.
Mittal Steel will have operations in 14 countries on four continents and 165,000
employees. The company's shares will be traded in New York and Amsterdam.
Shares in Ispat opened 14 per cent higher when trading resumed in Amsterdam
after the stock was suspended ahead of the merger announcement this afternoon.
