Steely persistence pays off

26 October 2004 By Edward Hadas

Lakshmi Mittal bought steel assets when no one wanted them. And then he ran them better than anyone thought possible. The results have been global market leadership and huge cash flow. The company now fits the standard definition of industry leader.

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Ispat, a quoted steel company 85% owned by Lakshini Mittal and his family, will take over LNM, the family's larger, privately held steel company. Ispat has a market capitalisation of $3.5bn at Monday afternoon's share price. That price values LNM at $14.7bn.

Prior to becoming a quoted company, LNM will pay its shareholders, the Mittal family, a $2bn dividend. After the dividend, the company will have net debt of $700m.

The combined company, to be called Mittal Steel, will then make a tender offer of approximately $4.5bn for ISG, a US steel producer. ISG shareholders will receive half of the value in cash and half in shares. The number of shares depends on the price of the new Mittal Steel shares, with both a maximum and a minimum exchange ratio.

Mittal Steel will be the largest steel producer in the world in tonnes, and among the most profitable. The company was founded in 1969 and has grown through buying old steel mills, mostly in developing economies.

The Mittal family will control 88% of the new $20bn$22bn market capitalisation company.

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