Cold Steel : Lakshmi Mittal and the Multi-Billion Dollar Battle for a Global Empire

“ Cold Steel ” is written by Tim Bouquet and  Byron Ousey. The later was advising the Luxembourg Government on their communication strategy  during the period covered by the book. As the name suggests,  the book is about Shri Lakshmi Mittal and the multi-billion dollar battle for a global empire. The book written like a fiction, puts together a compelling story on struggle for market domination between the two of the world’s largest producer of steel,  i.e. Arcelor  and Mittal Steel. 

Since during this time,  I was working  at  the Polish entity of Mittal Steel, I had a ring side view, but not in as much detail as is given in this book. Some of the  characters in the book are known to me, but that is besides the story. As is well known ultimately the controlling interest of  Arcelor was bought over by the Mittals and  Arcelor-Mittal became the largest steel company of the world. Subsequently, I worked at the combined head-quarter of Arcelor Mittal at Luxembourg too. 

The then CEO of Arcelor, Guy Dolle has been painted as a principled person, an expert in production of steel, not as good in public relation. On the other hand Shri LN Mittal and his son Shri Aditya Mittal are portrayed as master strategists, who traveled the entire world, met all the stake holders, had numerous meeting and made numerous presentations. They are master financial and PR strategists also and had no dogmatic approach on any matter always ready to accommodate.. The billion dollar savings because of the synergy  of  merging the operations of Arcelor with Mittal Steel and the complimentary nature of their product baskets made logical sense at that time to many shareholders. Use of Russian Servostal  as a poison pill from Arcelor’s side did not go well with the shareholders, it seems. Two highly internationally renowned investment bankers and brothers Yeol Zaoui ( Goldman Sachs) Michael Zaoui ( Morgan Stanley ) were in  opposite camps.As brothers they were very close, speaking to each other most of the days, and dining their mother once a week. They would be holidaying together, but when they were working on opposite sides they were strictly professional. The writers want us to believe, that there was one thing they never spoke out to one another is the deal.

After the acquisition, in 2007 Arcelor Mittal had grown to a company, with market capitalization of $ 128 billion, producing 116 million tons of steel generating a revenue of $ 105 billion. Its EBITDA was $19.4 billion  and net income of $ 10.4. Almost all the savings because of synergy promised by the Mittals were also achieved.

The political class of France, Germany. Luxembourg, India had played their respective roles and that is also well captured in the book. The names and roles of some of the executives on both sides are also well captured in the book. A battery of lawyers, investment bankers, PR firms were engaged by both the sides, and their names and roles also detailed as a part of the drama,

Prologue

However as Guy Dolle had put, the final outcome and success of this merger is yet to be pronounced. Because of the high Chinese demand and high steel price Arcelor Mittal made extra-ordinary profit in 2007 and a few months of 2008, which gradually came down over years. The turmoil after Lehman Brothers' collapse and the subsequent recession-like situation added woes to the steel industry.  Mr. Mittal lost many slots  in his ranking in the list of Forbes’ wealthiest persons.  The fall can be easily understood from the share price of Arcelor Mittal. Its shares were quoted at $103.1 as on June 2, 2008 and  on November 12, 2012, it is quoted at $ 14.85, a fall of 85% from the highest price.  Many of the subsequent expansion plans are on hold and Mr. Mittal’s dream of transforming Arcelor Mittal into a 200 million ton steel is still a distant vision. With profit margin of -0.85%, return on equity of – 1.29%, and book value of $ 35.58 , its shares are quoting on Nov 12, 2012, at 41% of book value, in short it is a disaster as of now. Only posterity will tell whether the acquisition  made any sense.

Whether the merger has worked or not, world steel production has gone up or not, steel quality has improved or not, many people in the game, the shareholders, investment bankers, and an array of advisers  have made huge money, and  even the employees, who unloaded their stock options at a huge profit. 

This  is an engrossing  story of modern day  mega-capitalism.