In a global environment of business concentration the steel industry is not at rest

October 19, 2011 12:00 AM
In a global environment of business concentration the steel industry is not at rest

In a global environment of business concentration, the steel industry is not at rest. The first global player, Mittal, wants to offer of EUR 25 billion on the second, Arcelor, born in 2002 from the merger between Arbed-Aceralia-Usinor. Individual shareholders much courted by the target company have the means to determine their vote in full knowledge of the cause The IAPA, Association for the promotion of individual ownership, to understand. If the industrial appropriateness of such rapprochement and geographical complementarity of the two entities are indisputable, the fundamental question is on the value of the securities from the Luxembourg Arcelor and Mittal Dutch, both having conducted over the past five years many acquisitions. It is well established in the minds that Mittal produced in quantity of base steels and that Arcelor manufacturing special steels and alloys with high added value. Excellent and stable results provided by the activities of long products carbon is an eloquent example for Arcelor. The number of families of patents owned by Mittal would 20 then Arcelor, technological flagship, in would have nearly a thousand. The undercapitalisation of the target would be only of taking insufficient account of its intangible assets Invited to Paris by French Julien Onillon, Director of investor relations of Mittal, for a comprehensive presentation of his group, we first demonstrated our concern about its R & D policy. It was clearly said that Mittal had control of technological processes deployed in its factories and preferred the transversality of knowledge. Steel supplier of all major global automakers and undisputed leader in North America, it is investing massively in Central Europe to enjoy a very sustained growth and a less expensive skilled labour. We also interviewed him on the impact of rising raw materials: owner of mines, the Mittal group provides a part of its supplies and its independence, which is far from being a handicap.

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The accuracy of recovery requires a compelling need for financial transparency and governance. That suggests the transfer announced by Arcelor of the Canadian steelmaker Dofasco, recently acquired from a hostile takeover bid, to a Dutch Foundation, without requiring the agreement of the shareholders, permitted the Luxembourg law What role are expected to play the new entrants from the steel capital of Arcelor Conversely, the complexity of the Galaxy Mittal, revealed in the record of 20-F, transmitted by the group to us CST, the SEC, and making the beautiful part to tax havens, raises a few questions. Our questions to focused on the holders of the 12 of the float, on the composition of the Board of Directors and the independence of the directors. Noted us that the 12 were held by many institutional, the largest being Fidelity and that most of them have grown recently in the capital. This renewal of confidence is explained by the exchanges between management and the consulted fund managers regularly on the company's strategy. We recommended the appointment of several new administrators, men and women as well as a censor. To ensure good communication with individual shareholders, population of investors that Mittal is seeking to be added, we advocated the creation of an Advisory Committee to shareholders, even a Club of shareholders as well as visit industrial sites, apparently acquired. We also asked that us is justified the policy of double voting in the current parity which seems calculated to avoid that the Mittal family will fall fateful below 50 of capital and with 64 of voting rights. Individual shareholders are to invest in groups managed by a family, the latter being very often better valued.

Side target, both of particularly stopped us: increasing consistently and sudden dividend, from 1.20 euro 1.85 euro (must admit that the rate of distribution was only 19 and therefore very low) and the late announcement of a possible exceptional dividend, demonstrating thereby that the distribution policy was not clearly defined. The commitment to make the cash surplus, up to and including from disposals of assets, are not part of the core business, comes at a time where individual shareholders have lost confidence. Why we proposed a share repurchase program It is not incompatible with the stated desire of a policy of acquisitions relutives "guaranteeing greater than 15 return on capital employed"

If Mittal to prevail, we do not know what would be the impact on the social plan; at the time where the "old" Europe knows many relocations and massive layoff plans, that will be Individual shareholders both questioned the possible reclassification of laid-off employees and greatly fear having to suffer the often prohibitive cost of the severance of the leaders. A strong affectio societatis is developed for the steel industry in some regions; This industry, which sustains several employment basins, is now once again under the spotlight but this time in a world carrier, it stirs up comments and catches of position late and sometimes inappropriate. How justify them implanted groups today around the world Often clumsy interventions do that inflame the debate, make it passion, without to provide sufficiently concrete elements necessary to a just taken position.

Some, such as the American ISS and Adam into France, recommend "do not re-elect the President and the Vice-President of the European steel producer", without offering for a new boss! Is there not in the current course of action a premium due to a possible speculation But what society Arcelor and its course of scholarship in the hypothesis where the supply of Mittal would not receive a favourable echo There is still this record many uncertainties, we the wish, should be lifted to the General Assembly of 28 April. Should we expect the sudden reversal of some institutional as last year the General Assembly to Havas Look forward to the final offer of Mittal and Arcelor defence strategy.