Mittal to Form Steel Giant
British steel magnate Lakshmi Mittal agreed Monday to buy International Steel Group Inc. for $4.5 billion and merge it with his other assets, creating the industry’s largest player.
The deal represents a huge bet on a sector that saw many companies in bankruptcy protection just a year ago. The industry has revived thanks to soaring global demand, especially from China.
The new company, to be called Mittal Steel Co., would be created through the $13.3-billion combination of two steel firms controlled by Mittal and the $4.5-billion cash and stock purchase of Richfield, Ohio-based ISG.
With more than $30 billion in annual revenue, it would gain greater control over steel pricing at a time when prices have not only soared but perhaps peaked.
The deal is a coup for ISG Chairman Wilbur L. Ross, a former Rothschild & Co. banker who built ISG over the last few years by buying troubled companies, including Bethlehem Steel Corp., LTV Corp. and Weirton Steel Corp., at low prices.
Mittal Steel, with businesses in Europe, Africa, Asia and the U.S., would bring an international angle to consolidation in the steel industry, which has been dominated by regional mergers. The new industry leader would outstrip current global No. 1 Arcelor in output.
Analysts said such deals were needed to keep the U.S. steel market healthy.
“Further consolidation continues to make the market more rational, after the series of bankruptcies” over the last decade, said Brian Rayle, an analyst at Midwest Research in Cleveland. “This will help the U.S. market. It helps globally, but to a lesser extent.”
Under the terms of the deal, Netherlands-based Ispat International, which is 77% owned by Mittal, would buy the Mittal family’s LNM Holdings in a reverse takeover by issuing $13.3 billion in shares to form Mittal Steel.
Mittal Steel would then pay about $42 a share in cash and stock to ISG’s shareholders.
The news sent shares of Ispat soaring $6.96 to $32.30 on the New York Stock Exchange. ISG jumped $5.57 to $35.25, also on the NYSE. ISG had been as high as $43 in March.
Despite Mittal Steel’s size, it would have only 6% of global output, raising expectations that many similar deals will follow. Other steel shares rose sharply, including U.S. Steel, up $2.24 to $35.85; Nucor, up $1.54 to $41.71; and Wheeling-Pittsburgh, up $1.89 to $30.94.
Mittal, an Indian-born self-made billionaire who lives in Britain, created LNM Holdings in 1995 by buying unwanted operations and now has steel assets in South Africa, Poland, Indonesia, South Africa and Kazakhstan.
Mittal, who would be chief executive of Mittal Steel, said the new group would have an annual production capacity of nearly 80 million tons and operations in 14 countries.