January 30, 2006 | posted by Michael Baxter in Uncategorized |

Brace yourself for some surprising news. France doesn’t like it when foreign companies try to buy out its own. And France certainly does not like the sound of Mittal’s bid for Arcelor.

Not that Arcelor is specifically French. While it employs 30,000 workers in France, if any country can claim domain, it’s little Luxembourg. The state there is the single biggest shareholder, with a 5.6% stake, and the company employs 6,000 workers in Luxembourg, making it the country’s third largest employer. And there’s a special relationship between the steel maker and Luxembourg too.

So when Mittal Steel, which is based all the way across the world in Rotterdam, made its €18.6bn (£12.8bn) bid, there were cries of no thank you, both from the Luxembourg government and from Arcelor’s board. The French have not yet made their pronouncement over the deal, but if they give it the thumbs up it would be a bigger surprise than the news this weekend that Pink Floyd are touring again.

Steel is a commodity, and the price, after moving through the roof a couple of years ago, has been falling. And the answer to the problem of a falling commodity is usually consolidation in the industry.

Mittal Steel reckons that by merging with Arcelor, the resulting company will then control 10% of steel production, and be three times bigger than their main rival, big enough to give it bargaining strength with customers. Mittal also says that cost savings resulting from the merger will amount to $1bn, without job losses, but in Luxembourg, France and Belgium too, ministers are asking how can this be so?

As for Arcelor, its statement said the board had “concern regarding the severe consequences that Mittal Steel’s proposal could have on the group, its shareholders, employees and customers….The continuation of Arcelor’s present strategy offers the best guarantee of value creation for shareholders.”

An Arcelor spokesman put it more strongly, however. He said: “That Mittal needed Arcelor more than it needed Mittal,” arguing that the predatory company was reliant on steel production in areas of less political stability, whereas 80% of Arcelor’s steel production is in the EU.”

The predatory steel company’s eponymous boss, Lakshni Mittal, the richest man in Britain and the third richest man in the world, is in further meetings with ministers from France and Belgium this week.