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Corporate culture clash in Mittal's bid

Many cringed when Arcelor's French chief executive compared his co's steel to perfume and that of Mittal's to a mere eau de cologne.

india Updated: Feb 09, 2006 17:20 IST

Many cringed when Arcelor's French chief executive compared his company's steel to perfume and that of rival Mittal Steel Co to a mere eau de cologne.

In addition to such jabs at Mittal's product quality, criticism of its hostile bid for Arcelor SA was also laced with talk of "cultural differences" between Arcelor and Mittal's Indian-born boss - a phrase in which some saw a racial subtext.

Other critics, however, say the companies are ill-matched not because their products or national cultures differ - but because their corporate cultures clash.

Mittal's surprise euro18.6 billion ($22.5 billion) bid knocked Arcelor and European officials off balance, raising questions about corporate structure, how much influence Europe's industry will have in a globalised world - and even what makes a company European.

Chairman Lakshmi Mittal is also the CEO, and his 28-year-old son is his financial chief - both of which raise concerns about corporate governance, as western companies are under pressure to be more transparent in the wake of scandals involving Enron and Parmalat.

"Their family owns 88 per cent of the stock. Who are they working for, shareholders or themselves? This is an important question, and it's why we have a hold rating on the Mittal stock," said steel industry analyst Charles Bradford.

The takeover, which would be the biggest steel deal ever, would have repercussions across Europe but also in North America and Asia, where both companies have plants.

First Published: Feb 09, 2006 12:16 IST