European protectionism blocks Mittal Steel bid for Arcelor
One month has passed since the world's largest steel manufacturer, Mittal Steel, put forward a hostile offer for its closest rival, Arcelor. After an initial rejection, the takeover has become highly politicised, with accusations of racism from the Indian government and European Union involvement.
Guy Dollé, chief executive of Arcelor, made a personal attack against Lakshmi Mittal, chairman and principal owner of Mittal Steel, stating that he did not trust Mr. Mittal's promises and he would not rule out combining with another large steel maker to thwart the bid. He was referring to promises made in the post-bid briefing that claimed Arcelor top management would partake in the running of the newly formed company.
The bid was formally tabled by Netherlands-based Mittal but was rejected shortly afterwards by Luxembourg-based Arcelor. The deal would see the formation of the world's first manufacturer producing over 100m tonnes of steel per annum, with an 11% share of the market. Nippon steel, the third largest, and a Japanese based company, currently outputs 32m tonnes.
The steel industry permitted Luxembourg's lavish growth into the nation with the world's highest GDP per capita. There is an Arcelor workforce of 6,000 and the state owns 5.6% of the company, giving it a limited ability to block the deal.
The Indian government brashly responded to claims, accusing the EU of a race-motivated agenda in hindering the progression of Mittal Steel. The Indian trade secretary warned that intervention in the deal, allegedly due to European protectionism, could derail delicate talks on global industry.
In contrast, European entrepreneurs feel the deal highlights political weakness in guiding the progress of key deals. Ernest-Antoine Seillière spoke of behalf of 20 million businessmen, stating that unless politicians took an active role in answering symbolic industrial questions, companies would end up leaving the EU. The French businessman vehemently opposes the Mittal bid as "a symbol of globalisation against a symbol of Europeanisation".
The Arcelor takeover war continues, with attempts by Dollé to woo shareholders with promises of increasing profits and accusations that Mittal plants in the U.S. are in dire need of renovation. On the other hand, Lakshmi Mittal has met with the French government to give assurances over employment in an attempt to bolster support as Mr. Dollé holds paralleled meetings with investors, urging the rejection of Mittal's imminent second offer.
It can be argued that political involvement in deals, which frequently occurs in the U.S., harms global competitiveness. Congressmen were deemed as highly hypocritical for demanding Russia opens up oil reserves to U.S. owned companies while blocking an attempt by a Chinese company to acquire Unocal, the Americanbased oil company. More recently, lawmakers are attempting to block a Dubai Ports World bid for P&O, which is responsible for the security of 5 East-coast ports in the U.S. The Bush administration argues that the United Arab Emirates is a friend and the deal should go ahead.
