Assessing Mittal Acquires Arcelor

Assessing Mittal acquires Arcelor

This case describes the hostile takeover of Arcelor by Mittal.

Case Analysis

There have been creative defenses used by Arcelor during the M&A event with Mittal. There has been extreme use of money in the event and attempts to stop Mittal from acquiring Arcelor.

The two defenses by Arcelor were:

1. Arcelor doublings its dividends and announcing plans to buy back about $8.75 billion in stock above the market price for Arcelor stocks.

This defense was a good move since this would gain the share holders trust and interest in the corporation. During M&A, acquirer plans to purchase the stocks from the open market. This move would help Arcelor buy back to stocks and thus leaving less stocks volume in the open market that would be available for Mittal to acquire.

2. Deal with Russian steel market Severstahl. Arcelor agreed to exchange its shares for Alexei Mordashov’s 90% stake in Serverstahl.

This defense was not worth while because this was diluting the ownership of Arcelor just in attempt of not getting acquired by Mittal. This would also introduce a new board member in power and would impact all future Arcelor dealings.

If the board refused the final offers then Mittal would have come back with the Lower offer. Shareholders would have reacted and started selling the Arcelor stocks bringing the Arcelor stock value down. While Mittal was interested to acquire at a higher premium, Arcelor was defending with the known fact that the premium offer would not be available for longer. Shareholders would have demanded change of board and directors.

Yes, Merger shall provide hurdles for entry to the market based on geographical and political situation of the organization and environment. Antitrust laws would play a role in the market and would be one of the biggest barriers for M&A. In the global market, suppliers versus consumers demand should balance out and there should be multiple suppliers to avoid monopoly....