Dutch Firm to Buy International Steel

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The New York Sun

AMSTERDAM, Netherlands – A privately owned Dutch steelmaker led by billionaire Lakshmi Mittal is consolidating its steel holdings and is buying America-based International Steel Group Inc. for about $4.5 billion in cash and stock in a deal that would make it one of the world’s largest steel companies.


The combined company under the deal announced yesterday would have operations in 14 countries on four continents, generate revenue of more than $30 billion this year, and employ 165,000 people. It would rival Luxembourg’s Arcelor SA as the world’s largest steelmaker.


The combination comes amid widespread expectations for industry consolidation as worldwide production has outstripped demand.


As part of the transaction, privately owned steelmaker LNM Group would merge its two main divisions, Ispat International NV and LNM Holdings NV, and then take over ISG, which has grown in three years under former investment banker Wilbur Ross into one of the biggest American steel producers by acquiring money-losing mills out of bankruptcy and making them more efficient.


Rotterdam-based Ispat will first buy the Antilles-based LNM Holdings NV for $13.3 billion in stock. It then will buy Richfield, Ohio-based ISG, which has scooped up the steel-making assets of fallen giants like LTV, Acme Steel, Bethlehem Steel, and Weirton Steel. Mr. Ross will be on the board of the new company.


The combined group will be based in Rotterdam under the name Mittal Steel Company NV, and seek a dual listing on the New York Stock Exchange and Euronext.


LNM Group will retain control of Mittal Steel after the deal, a spokesman said.


“These transactions dramatically change the landscape of the global steel industry,” said Mr. Mittal, the India-born steel tycoon who will become chief executive of the new company.


“The combined company will have excellent positions in raw materials, particularly coal, coke, and iron ore, as well as strong positions in key end sectors.”


At a conference call after the deal was announced, Mr. Mittal said the combined company would have operating profit of about $7 billion and debt of around $3.2 billion.


The new company is offering ISG shareholders a combination of $42 in cash and stock for each ISG share. That is a 41.5% premium over ISG’s closing share price of $29.68 a share on Friday. ISG shares rose $5.57, or 18.77%, to $35.25 on the New York Stock Exchange.


The deal is supported by the corporate boards of all three companies, they said in a joint statement, though it has not yet been approved by regulators.


Their statement said the new company would benefit from a more diverse product offering and a larger size generally, but did not say whether it planned to lay off workers in areas of overlap.


ISG chief executive Rodney Mott, who will lead the combined American operations, said no plant in North America would be targeted for cutbacks or shutdown. “We’re looking for opportunities to increase capacity,” Mr. Mott said.


Mr. Ross, speaking on a conference call with Messrs. Mittal and Mott, said he expected no problem with getting regulatory approval of the ISG deal. In addition, he said he expected no controversy when the deal is put before ISG shareholders.


The New York Sun

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