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THE WEEKEND INTERVIEW
Heavy Mittal
The richest man Americans have never heard of.
BY MATTHEW KAMINSKI
Saturday, February 4, 2006 12:01 a.m.
PARIS--Lakshmi Mittal built up the world's biggest steel company--and the thirdlargest personal fortune of any man--by acquiring mills in the dodgiest of places. He
honed his deal-making skills on the frontiers of capitalism: in Indonesia, Kazakhstan,
Algeria, the Balkans, often in countries one might need to look up in the very latest
atlas. In the past week, however, the 55-year-old Indian mogul has found himself in
arguably the most difficult business environment of all--Western Europe.
In terms of political resonance as much as sheer size, Mittal Steel's hostile $24 billion
bid for the world's second-largest steelmaker, Luxembourg-based Arcelor, is without
precedent in Europe. The prime ministers of France and Luxembourg, jointly and
repeatedly--along with politicians across the board--condemned the Indian's
gumption and vowed to stop him. Worse were the threats from the unions and
Arcelor's chief executive, Frenchman Guy Dollé.
A takeover of Arcelor would take Mr. Mittal a long way toward realizing his vision of a
dominant global steelmaker in an industry for decades characterized, and brought
low, by fragmentation. To pull it off, Mr. Mittal needs to break an Old World taboo
against takeovers, hostile or otherwise, involving a company dear to Continental
protectionists' heart. That this task falls to a man born in Rajasthan, and raised in
Calcutta, is one of the more delicious gifts of globalization.
Before Arcelor's shareholders get their say on his offer, Mr. Mittal is trying to smooth
the way with irate politicians. He spent this week shuttling around European capitals
talking up the deal. If it's Tuesday, this must be Luxembourg in the morning and
Paris in the afternoon, where I catch him, before a late-evening trip back home to
London. "I've been all over, all over, all over, from one meeting to another meeting,"
he says.
In person, Mr. Mittal hardly looks the brash and aggressive "raider with foreign
values" portrayed in Arcelor spin. He says he's relieved to be away from the army of
cameramen who've dogged him around Paris the past two days. (The merger has
stayed front-page news the whole week in France, home to 30,000 Arcelor workers.)
"It has been blown way out of proportion," Mr. Mittal says, slouching in his seat, with
more than a hint of an Indian accent. "It should have been a very positive
atmosphere. That steel companies are merging should be great news." Is he serious?
He claims to be. "We're waiting for Arcelor to begin friendly talks,"
he says. "We really do not want to work in a confrontational
environment." He uses the word "friendly" repeatedly.
Mr. Mittal is disarmingly agreeable, an impression that his staff
insists is the real deal. He takes steel seriously and seems to keep
his thoughts to himself. The modesty can strike a bit of a false note,
if only because anyone who got around corrupt governments to
build a metals empire can't lack a thick skin and, shall we say,
some flair. When I suggest the nice tycoon image might be the
"Indian way," he scoffs, saying, "There is nothing Indian here, there
is nothing European here, you have to run a multinational company
in a proper fashion with top professionals."
The attacks on him have been vicious. Valery Giscard d'Estaing, the former French
president, warned against giving into economic "laws of the jungle." A former French
finance minister referred to Mr. Mittal as "an Indian predator," although his company
is traded and based in Europe and he hasn't lived in India for 30 years. Mr. Dollé, the
Arcelor boss, said Rotterdam-based Mittal Steel is a "company full of Indians" that
wants to buy his with "monnaie de singe." The expression means "monopoly
money"--Mittal's offer is mostly shares--but the literal translation is "monkey
money." That double-entendre wasn't lost on people.
This barbarian at the gate fights back with flattery. "They're all emotional comments
. . . absurd and frivolous," says Mr. Mittal. "I know Guy Dollé and he's a very nice
gentleman. I respect him and I admire him." He says he hasn't seen the race card
played against him for a long time. "In the late '80s, when I bought the first
company in Trinidad, I remember the headline was 'An Unknown Indian Takes Over
Caribbean IISCOT.' But people started knowing me and today they don't ask who is
Lakshmi Mittal. [Nationality] is not an issue globally. I don't think the world is
moving in that direction."
Trinidad was the start of an acquisitions spree that catapulted Mr. Mittal into elite
business ranks almost overnight. He says it took longer than people imagine. Mr.
Mittal was born in a small village in the Indian desert state of Rajasthan, which he
suggests may explain his dry character: "My roots are there." His father moved the
family to Calcutta, ran a mining concern, and took him on at 16. "He has been my
mentor in India and encouraged me to go outside," Mr. Mittal says. In 1976, while in
Indonesia to finalize a land sale for the family firm, he convinced his father to help
him start a new steel business there. But only in Trinidad, the maiden foray outside
of Indonesia, did "I realize that we can turn around these kinds of companies and
create value for us."
Not long after came a $2 billion purchase in Mexico, against his father's advice, and
an audacious move into Kazakhstan in 1995, when no major steelmaker could
stomach the risk or the climate. The Kazakh plant, which employs 50,000, supplies
China. At the time of its purchase, Mr. Mittal was the world's 32nd-largest
steelmaker. But he has made a simple gamble that low-cost producers can thrive,
once made efficient, by selling to growing developing economies that are hungry for
steel. Against the grain, Mr. Mittal held that an industry plagued by overcapacity and
low prices had hidden value. As other steelmakers were busy retrenching, Mr. Mittal
picked up plants in 14 countries, mostly in emerging markets.
"I wouldn't say they're dodgy but they're places that others would not think to go,"
he concedes. So why did he? "I believed in my people--I believed in our ability to run
those operations." Continued family control lets Mr. Mittal, who owns 88% of his
firm, take chances that companies with diverse shareholders would never dream of.
His only daughter, Vanisha, sits on the board, and his 29-year-old son, Aditya, is the
chief financial officer. The ownership structure raises questions about transparency
and corporate governance that Mr. Mittal dismisses. He says Mittal shares, if
anything, are "always undervalued." If Mittal Steel gets Arcelor, he'll keep 50.1%,
and insists on no less.
For years, Mr. Mittal has said that only two or three big players will dominate his
industry in the future. He wants to do what Henry Ford did for cars: make Mittal
synonymous with steel. "If you look at our customers, they are consolidating," he
says. "There are three or five major car companies in the world. If you look at our
iron suppliers, there are only three iron suppliers. It is a very natural process. It is
more so in the steel industry, which has been very fragmented." Even together,
Arcelor-Mittal would still only account for 10% of world steel production. "It's longer
to go for us," he says.
The American steel industry was broken up not only along national but state lines. "I
gave a speech in '97 in Pittsburgh where I spoke about consolidation and
globalization," he says. "It was difficult for my audience to accept it. But three years
down the road there were 27 bankruptcies in the United States." In 2004, Mr. Mittal
made his breakthrough deal, buying Ohio-based International Steel Group, a
hodgepodge of once-proud names like Bethlehem, Weirton and LTV that investor
Wilbur Ross put together. Historic highs in steel prices have made Mr. Mittal's
strategy look brilliant. The company earned $4.7 billion on $22.2 billion in sales in
2004, the last year for which results are available.
The U.S. purchase turned him into the new Carnegie, the biggest steel producer in
the U.S. That year, Mr. Mittal added nearly $19 billion to his net worth. He's
doubtless the richest man most Americans have never heard of. Unlike an Ellison or
a Trump, Mr. Mittal doesn't court or invite publicity. When I mention in passing his
No. 3 spot on the Forbes list (net worth: $25 billion), he smiles sheepishly: "Am I?"
But in Europe, the overtly modest man's lavish tastes garner notice. He owns the
world's most expensive private home, a $127 million mansion in London. Nearly two
years ago, the British tabloids had great fun with the $60 million wedding thrown for
his daughter and a thousand close friends over five days in France. Kylie Minogue
and Bollywood stars entertained at the 17th-century Chateau Vaux le Vicomte and
other venues. Plenty of moneyed people like to spend it; there's a whiff of
condescension in the faux-outrage about this rich Indian's tastes, no? He refuses to
talk about it. "We want to keep private everything," he says.
London, a cosmopolitan city as never before, is an ideal base for this poster-magnate
of globalization. He says it's well-placed for a geographically diverse operation. But
the future, for him, is in the East. He recently started his first business in India.
China "is in the same place Japan was in the 1970s," where steel consumption
outstrips economic growth as the country builds up infrastructure. Mittal was the first
company to take a major stake in a Chinese steel mill, but he suggests further
investment can only come once Beijing agrees to open the sector and let marginal
producers fail. Of the two Asian powers, only India is politically open. "I don't think
democracy has anything to do with business." Is freedom or stability more
important? "Most important is growth," he says.
In selling the Arcelor takeover, Mr. Mittal plays to his European audience by stressing
the competitive threat from Asia. "If we do not have a strong European base with a
global enterprise, we could have an issue from a country like China, and our jobs
could be in danger," he says. Together, Mittal-Arcelor would employ 340,000 people
and produce 100 million tons of steel, more then the next four companies combined.
The bid did win him some influential friends in France. Jean Arthuis, a former finance
minister and senator, met the Indian and liked him. "France has to acknowledge the
reality of globalization," he said in widely reported comments. Seeing that Paris lacks
the weapons to stop him--the French state no longer owns a stake in Arcelor and
leading politicians as well as Mr. Dollé backtracked a bit from their tough talk by
yesterday--the markets hope that Mr. Mittal will succeed in slaying the dragon of
"economic patriotism" that's spooked away other foreign companies looking for
acquisitions. Last year Pepsi backed off from Danone once the French government
declared the yogurt-maker a "strategic" national asset.
One rumor sees Wal-Mart buying France's Carrefour. Mr. Mittal is skeptical. "This is a
Luxembourg company merging with a Dutch-listed company," he says, referring to
his own intra-European, on paper at least, takeover bid. "A Wal-Mart case would be
different." In other words, the Yanks are still more despised than any Indian. The
knee-jerk hostility to hostile takeovers--in effect, to capitalism itself--seems a
Continental trait. "Could be," says Mr. Mittal, only "Arcelor is involved in a hostile
takeover in Canada." He laughs, for Mr. Dollé is certainly no innocent: Arcelor last
month won a heated battle against a German rival for a $5 billion Canadian steel
producer.
Mr. Mittal's own nationality is an elusive target for adversaries. His very business
makes a mockery of the old nation-state model. He is nowhere and everywhere. As a
sop to the old European way of thinking, Mr. Mittal offered to keep the future
headquarters of a combined Mittal-Arcelor back in Luxembourg. "It doesn't matter to
me," he says. For in his sort of world, it really doesn't matter.
Mr. Kaminski is editorial page editor of The Wall Street Journal Europe.
Copyright © 2006 Dow Jones & Company, Inc. All Rights Reserved.
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