Mittal adds to power as CEO

Merger's architect takes rival's place

November 07, 2006|By Allison Connolly | Allison Connolly,Sun reporter

Steel magnate Lakshmi N. Mittal tightened his grip on the world's largest steelmaker yesterday, becoming chief executive officer of Arcelor Mittal three months after he engineered a stunning takeover of his biggest rival.

Mittal was to share leadership responsibilities of the combined company with Roland Junck, his counterpart at Arcelor, largely in an effort to smooth resentment from the protracted fight over the $38 billion merger. In August, after the merger was approved by shareholders, Mittal was named president of the board of directors and Junck CEO. Arcelor Mittal owns the Sparrows Point steel mill and controls 10 percent of the world's steel production, topping 110 million tons per year.

Junck said in a statement yesterday that he is stepping aside "in the best interests of all parties." He will remain a member of the board and will also serve as Mittal's adviser as they complete the merger, which should be done by spring.

"We are making these changes to clarify the leadership of the company," board Chairman Joseph Kinsch said in a statement. "It had become clear over the past months that the interests of the company were not best served by the previous structure."

The appointment must gain the approval of shareholders, excluding the Mittal family, which is the company's biggest shareholder.

Steel analyst Christopher Plummer said he was not surprised by the announcement.

"Their original intent was to maintain family control over the combined entity," said Plummer, managing director of West Chester, Pa.-based Metal Strategies Inc.

"When you own [nearly] 45 percent of the company, you're the boss," said analyst Charles Bradford of New York City-based Bradford Research Inc.

From an operational standpoint, Bradford said, the move makes sense. "It seems to simplify things."

The power shift comes as officials inside the company weigh whether they are able to sell Canadian steelmaker Dofasco Inc., a valuable asset that Mittal had promised to German-owned ThyssenKrupp AG if his hostile takeover of Arcelor SA was successful.

In an effort to thwart Mittal during his six-month takeover bid, Arcelor officials transferred Dofasco to a Dutch trust that makes its sale impossible without the consent of the three trustees, two of whom are from Arcelor, based in Luxembourg.

The clock is ticking. The Justice Department said Mittal has until the end of the month to sell Dofasco to alleviate antitrust concerns over tin plate production, though Mittal can ask for a 60-day extension. If it is unable to do so, Mittal must sell its plant at either Sparrows Point or Weirton, W.Va.

Bradford said it appears the company is still trying to sell Dofasco. The board presented the Dutch trustees a proposal and is waiting for a response, he said.

Plummer said he does not believe Lakshmi Mittal's new title will have an impact on the Dofasco discussions because he will still have to work with a board that includes Arcelor officials.

Meanwhile, Arcelor Mittal reported better-than-expected pro forma earnings yesterday, with a combined $2.18 billion for the third quarter. Sales for the period that ended Sept. 30 were $22.06 billion.

Yet the company stood by its forecast for the year, which suggests the fourth quarter will be disappointing, Bradford said. To scale back production, Mittal has temporarily idled blast furnaces in Cleveland and Indiana, and offered employees at Sparrows Point temporary layoffs of up to five weeks through the end of the year.

allison.connolly@baltsun.com

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