Various economic strategies of Mittal Iron and Steel Company ~ ~ ~

Lakos Mittal, chairman of the Lakos Mittal Group (LNM), is an Indian-British.

From 65438 to 0957, the father of Lakos Mittal, the current chairman of LNM, invested and founded a small rolling mill in India. Later, due to the Indian government's restrictions on private enterprises to set foot in the steel industry, old Mittal invested in and built a small rolling mill with an annual output of only 65,000 tons in Indonesia in 1976, and put it under the supervision of Lakos Mittal, who was only 19 years old. 198 1 year, the Mittal family invested and built an electric furnace steelmaking plant with an annual output of 300,000 tons in Indonesia.

From 1989 to 2004, LNM also acquired the only steel enterprise in Ireland and Annaba Company in Algeria.

From the perspective of global steel industry, cross-border mergers and acquisitions will bring amazing changes to the competition pattern of the world steel industry. In this regard, the world's largest iron and steel enterprise (LNM Group), which has the largest transnational M&A "span", the fastest rising speed and the highest M&A success rate, predicts that within 10, accel, LNM and American iron and steel groups are likely to develop into 300 million tons of iron and steel enterprises, and at that time, the world iron and steel enterprises with an annual output of 2.5-3 million tons will lose money.

Mittal Steel will also become the largest company in the steel market. The company will carry out steel business in 65,438+04 countries such as the United States, Canada and Mexico, and the number of employees will reach 65,438+065,000. In 2004, Mittal Steel Company shipped 4.265438 billion tons of steel, and earned 22.2 billion US dollars through export. President Mittal has become one of the richest people in the world. On the list of the world's richest people published by Forbes magazine on June 5438+00, Mittal ranked third with a value of $25 billion, second only to Bill Gates, chairman of Microsoft, and Warren Buffett, an American stock god.

[Editor] Mittal Steel is tempered by capital.

The development speed of international steel industry is currently at the level of 3% ~ 4%, while the growth speed of China is much higher than this level. Mittal, the world's iron and steel giant, is optimistic about this point, and started the capital battle in China's iron and steel market. Mittal, who is famous for his M&A in the steel market, has also made many achievements in China. As early as June 5438+ 10, 2005, Mittal signed an equity transfer agreement with Hunan Valin Iron and Steel Group Co., Ltd. (hereinafter referred to as Valin Iron and Steel) and became its largest shareholder.

The development speed of international steel industry is currently at the level of 3% ~ 4%, while the growth speed of China is much higher than this level. Mittal, the world's iron and steel giant, is optimistic about this point, and started the capital battle in China's iron and steel market.

Mittal, who is famous for his M&A in the steel market, has also made many achievements in China. As early as June 5438+ 10, 2005, Mittal signed an equity transfer agreement with Hunan Valin Iron and Steel Group Co., Ltd. and became its largest shareholder. On June 30th, 2005, 65438+February 30th, the world steel giant Mittal Company (hereinafter referred to as Mittal) took a share in Baotou Iron and Steel Group (hereinafter referred to as Baotou Steel), which was confirmed by both parties. This is another chess piece set by Mittal in China steel market.

Steel is tempered by capital.

Mittal Steel Company is one of the largest steel enterprises in the world. In June 2004, the famous LNM Holding Group and Ispat Iron and Steel Group merged and changed their names. At the end of 2004, after the merger and acquisition of American International Steel Company, the production capacity reached 60-70 million tons, ranking first in the world, with revenue of 22 billion US dollars.

However, LNM Group mainly adopts the way of acquisition and merger of existing steel enterprises, which makes its steel production capacity increase rapidly. The three ways of Mittal's rapid rise are low-cost acquisition and merger, using the most advanced technology to build new steel plants and transform old steel plants, and maintaining a leading position in the field of direct reduced iron production.

LNM started to build a small rolling mill in India in 1957, and built a bar and wire mill with an annual output of 60,000 tons in India in 1976. From 1986 to 1995, LNM Group acquired a series of steel mills in different countries (including Canada, Mexico, Ireland, Trinidad and Tobago, Britain, Germany and Indonesia).

Mexico's Sicartsa joint venture is a typical example. Initially, the Mexican government invested $2.2 billion to establish the Sicartsa joint venture company, but its operating rate only reached 25% and there were no orders. 1992, LNM group bought this company for only $220 million, and renamed it Ispat Mexicana SA (LNM group Mexico company). Throughout the 1990s, LNM Group invested heavily in the modernization of Mexican companies. By 1997, the slab output of LNM Group in Mexico tripled to 2.8 million tons. It has become the largest steel exporter and the largest producer in Mexico. 1999, LNM group invested $65,438+75 million to increase the company's steelmaking output, making the crude steel production capacity reach 4.4 million tons/year. LNM Mexico aims to be the first manufacturer in China to provide high-quality products for automobiles and white goods.

1995 LNM group successively acquired three steel enterprises. First, Irish Iron and Steel Company (a small electric furnace steel plant with an annual output of 440,000 tons, whose products are bars and profiles) was acquired for only 1 Irish pound; After the acquisition of Hamburg Iron and Steel Company (a small electric furnace steel plant with an annual output of 700,000 tons, the products are rods and wires, and there are 1 set of direct reduction iron facilities with an annual output of about 550,000 tons); In June, 1995, 1 1, Kazakhstan Karaganda Iron and Steel Company was acquired at a low price, which was the second largest steel joint venture established by the former Soviet Union to produce flat steel products.

1997, LNM group acquired Rwhrort company and Walgdraht Hochfeld company which produce excellent talent products from Thyssen company in Germany, with crude steel production capacity10.5 million tons/year.

1998, LNM group acquired American inland steel company for143 billion dollars. Inland steel company with 9,400 people is the sixth largest steel company in the United States, with a crude steel output of 5.3 million tons in197. LNM Group also acquired two joint ventures established by Inland Iron and Steel Company and Nippon Steel, accounting for 60% and 50% of the shares respectively. This acquisition has caused turmoil in the world steel industry.

Acquisition activities of LNM Group: First, less investment and large production capacity. Taking the acquisition of Karaganda Iron and Steel Company by LNM Group as an example, it cost 950 million US dollars and received the effect of increasing steel production capacity by 4 million tons, which is equivalent to an investment of 240 US dollars per ton of steel. Acquisition of inland iron and steel company 3 15 USD per ton of steel; The investment per ton of steel in the newly-built large-scale iron and steel complex is about 1.200 USD. Secondly, it is not only the hardware of the steel plant, but also the software formed by many years of production practice, that is, production know-how and management experience. In particular, the acquisition of established steel enterprises like inland steel companies has many proprietary technologies, such as the production of steel plates for automobiles and large household appliances, and is owned by LNM Group.

Third, the acquisition of existing enterprises, in addition to the acquisition of hardware and software of steel mills, also enables LNM Group to have talents to operate and manage steel enterprises quickly and completely.

These rich experiences provide valuable operational skills and space for Mittal's M&A in China.

Look at China Iron and Steel Second Corps.

Mittal has long coveted China's steel market. This is because China's steel market has made a historic breakthrough, from a net importer to an exporter. In 2004, China became a major steel producer in the world. Under such a prospect, Mittal, whose expansion means is acquisition and merger, will naturally not ignore China, a market with great potential.

Prior to this, since 2004, Mittal has been in frequent contact with domestic steel enterprises. Due to the state's control over the state-owned assets of the steel industry, Mittal did not contact several steel mills of China Iron and Steel First Corps, but turned his attention to the enterprises belonging to the Second Corps in the China steel market. Because the Second Army Corps is an enterprise controlled by the local government, it is relatively easy to enter. Mittal visited Xuan Steel, Xing Steel, Han Steel, Baotou Steel, Benxi Steel and Bayi Steel Works. In the end, Valin Group, which ranked eighth among the top ten steel enterprises in China, became Mittal's final choice.

Valin Group is a large-scale enterprise group jointly established by three major iron and steel enterprises in Hunan (Xianggang, Lianyuan and Henggang) at the end of 1997, and it is the largest state-owned enterprise in Hunan. In 2004, the steel output reached 765,438+300,000 tons, and the sales income reached 26.2 billion yuan. Steel exports reached 830,000 tons, earning 400 million US dollars, following Angang and Baosteel. Valin Group and its holding company, Valin Pipeline, have an annual output of 8.5 million tons of steel, and the market value listed on Shenzhen Stock Exchange has reached 8 billion yuan. At the same time, Valin Pipeline is the largest specialized manufacturer of wire rod, seamless steel pipe, rebar and copper coil pipe in Central and South China, and the national market share of small-diameter seamless steel pipe is the first.

For Mittal, the Valin pipeline is an ideal acquisition target.

In Mittal's view, Valin Group has a unique charm, and its equipment, assets, benefits, variety structure, management level and labor cost are all favored by Mittal Company, especially in terms of strategic development ideas, Valin Group is very similar to Mittal Company.

On June 5438+1October 65438+April 2005, Lakshmi, Chairman of Mittal Steel Company, signed an equity transfer agreement with Li Xiaowei, Chairman of Valin Iron and Steel Company, and Valin Group transferred more than 656 million state-owned legal person shares of Valin Pipeline to Mittal Steel Company. Mittal Iron and Steel Company and Valin Group are the largest shareholders of Valin Pipeline, holding 37. 17% of the company's total share capital respectively. The total amount of this equity acquisition will exceed 2.5 billion yuan, making it the largest transaction amount for foreign investors to acquire A shares in 2005. Li Xiaowei, Chairman of Valin Group, said that Valin Group took the lead in realizing strategic cooperation with the world's largest steel enterprise in China steel industry with substantial equity transfer as the main content.

This seems to be a win-win situation. In the agreement signed with Mittal, strategic cooperation is the most important content besides equity transfer. At present, 60% of the ore purchased by Valin Group is imported, and the price fluctuates with the market, which is generally high. According to the agreement between the two parties, Mittal will bring the Valin pipeline into its global procurement system and provide more than 3 million tons of direct ore supply to the Valin pipeline every year. According to calculation, even after the price increase of direct ore supply in 2005, the price difference between trade ore and direct ore supply is about $0/9 per ton/kloc, and the procurement cost of Valin pipeline will be reduced by about $57 million in 2005, which can save tens of millions of dollars for Valin pipeline.

In addition, the agreement between the two sides also stipulates that the two sides will strengthen cooperation in technology and R&D, and Mittal will gradually transfer technologies such as production and deep processing of value-added varieties such as plates, pipes and wires to Valin. The two sides also signed the terms of selling each other's products on a commission basis, stipulating that only a small amount of agency fees will be charged to each other. Obviously, Mittal's sales network in more than 40 countries around the world provides a good space for Valin Group's overseas expansion.

Lakshmi said that the acquisition of the equity of Valin Pipeline has become an important step to enter the fastest growing steel market in China. Mittal Steel will help Valin Pipeline to enhance its competitive position in many aspects, including making full use of its global sales network, procurement system and two research centers, and helping Valin Pipeline to achieve its expansion goal.

Exploring the bottom line of Baotou Steel's acquisition policy

After successfully entering the Valin pipeline, Mittal's M&A in China began to accelerate. Soon, Baotou Steel was acquired by Mittal. Mittal is interested in the "sustainable development ability" of Baotou Steel, which owns its own Baiyunebo mining area and is not affected by the ore price in the international market. In addition, Mittal is optimistic about the production capacity, technical equipment and long-term development of Baotou Steel.

Baotou Steel was founded in 1954, and was restructured into Baotou Iron and Steel (Group) Co., Ltd. in June 1998. It is an important steel production base in China and the largest rare earth research and production base in China.

According to the statistics of World Iron and Steel Trends, Baotou Steel plans to increase its annual output to100000 tons before 2009. Baotou Steel not only has raw material resources such as iron ore and coking coal, but also is in a leading position in China in the production and manufacture of high-quality steel products such as cold-rolled coils for automobiles and washing machines.

Subsequently, the merger with Baotou Steel entered the substantive operation stage. Mittal invited Deutsche Bank and KPMG to participate in the due diligence of Baotou Steel, and more than 65,438+00 technical experts from different fields were transferred from Mittal's global production base. They come from the United States, Germany, Poland, India, Kazakhstan, Romania and other countries, and are technical experts in the fields of coking, ironmaking, steelmaking, seamless steel pipe, plate, wire rod, heavy rail, special steel and environmental protection of Mittal Group.

However, according to the iron and steel policy promulgated and implemented in 2005, there are three requirements for foreign capital to enter China's iron and steel industry: first, it does not hold shares in principle; Second, it has certain qualifications; Third, it should be combined with the transformation of existing enterprises and the adjustment of relocation structure, and no new points should be made.

Therefore, Mittal, who has always adhered to the principle of "100% equity acquisition", must also change this principle in China. According to the news from both parties, Mittal owns 49% of Baotou Steel, which not only exceeds Mittal's shareholding ratio in Valin Pipeline, but also is very high among domestic and foreign steel enterprises, which is close to the bottom line that holding is not allowed in principle.

[Editor] Mittal, the steel king: He wants to annex the steel industry all over the world.

Constantly merging steel companies from other countries.

11In March, 2005, Mittal Steel Company spent $4.5 billion to acquire the international steel group. With the dust of this transaction settled, Mittal Steel Company jumped from the second child to the largest steel enterprise in the world, and Mittal also reached the peak of his career.

The sensational merger case of international steel group reflects Mittal's ambition to become the "Henry Ford" of the steel kingdom in the 2 1 century-not only controlling the whole kingdom, but also realizing the transformation of the operation mode of the whole industry.

The "management-imitation" mode in Mittal's mind depends on three important creeds. First of all, the specific management details must be strictly monitored by Mittal, although this means that he will fly 350,000 kilometers by private jet in one year. Secondly, Mittal is convinced that profit, not output, is the only criterion to measure a traditional enterprise. He was glad to learn that some of his competitors began to notice this problem. Finally, Mittal firmly believes that the steel industry in the 2 1 century, like the automobile industry in the 20th century, will be efficiently integrated into three or four super giants, and his company is the best among them.

Mittal's way of achieving his career seems to be nothing more than buying a series of steel companies on the verge of bankruptcy and then trying to help them regain their vitality. Mittal really has the ability to turn decay into magic. The secret is that Mittal knows how to find the right M&A target. Most of the steel enterprises that Mittal bought in Kazakhstan, Romania, Czech Republic and Poland are enterprises with surplus labor and backward technology. In these countries, because of his inevitable layoffs, local trade unions listed him as a "brutal capitalist", but few people noticed that Mittal not only reduced operating costs, but also included a set of perfect management mechanisms, such as strict safety regulations, dynamic quality control and getting through logistics communication between suppliers.

In the past 17 years, when competitors scoffed at those ancient steel mills, Lakshmi Mittal gradually built a powerful world steel kingdom on the ruins of these factories.

[Editor] Mittal's China Raiders

On the global map, Mittal still needs to fill many gaps, and China has become the strategic focus of Mittal. Not long ago, Mittal bought a 37% stake in China Valin Pipeline for more than 2.6 billion yuan, and became the largest shareholder of the company together with Valin Group. This transaction is the largest case of equity merger and acquisition among foreign-funded A-share companies.

Mittal said at the signing ceremony that China's economy is developing rapidly and it is the most important country for the development of iron and steel industry. Mittal Steel Company is a global multinational enterprise. Buying the equity of Valin Pipeline will be an important step for Mittal to enter the fastest growing steel market in China. He said that Mittal Steel will help Valin Pipeline Company to enhance its competitive position in many aspects, including making full use of its global sales network, procurement system and two research centers, and helping Valin Pipeline Company to achieve its expansion goals. As a member of Mittal Steel, Valin Pipeline will be incorporated into its comprehensive procurement system and enter its global sales network.

Mittal also set his sights on a large steel plant in his native India. He said: "I don't want to run the largest steel enterprise in the world, but I want to run the most profitable steel enterprise."

Even competitors admit that Mittal now has a wider group and high profits envied by his peers compared with four years ago.