Mittal exposes EU double standards
Hostile reactions to the bid by Mittal Steel to buy out Arcelor has exposed unfair practices.india Updated: Feb 01, 2006 12:13 IST
The hostile reactions of the French and Luxembourg governments to the bid by Mittal Steel to buy out European consortium Arcelor has exposed the double standards practised by European Union politicians and governments.
On Friday, Thierry Breton, the French finance minister, was preaching at the World Economic Forum (WEF) on how France was an entirely open market and how it would welcome investments by industries and companies from all over the world, including Asia. Barely a few hours later, Breton was singing an entirely different tune, saying that he was worried by the bid by Mittal Steel, the world's largest steel maker.
On Monday, when Mittal - the chairman and CEO of Mittal Steel and the world's richest Indian - made the formality of calling on Breton, the latter said that Mittal did not have any action plan for Arcelor and that he had failed to show that there were cultural compatibilities between the two giants. Breton also said that he was not in favour of hostile bids being launched by companies without any previous discussions.
Just through these statements, the hypocrisy stands out. Breton had little to say when over the last four months, Arcelor had been in a hostile bid for a Canadian steel maker Dofasco. Even the huge cultural differences between Arcelor and its prey were not enough to get Breton to intervene, but now that Arcelor is the prey of a predatory action, Breton was quick to jump to its defence.
For his part, Arcelor chief executive Guy Dolle was quick to realise that he had little armour to protect Arcelor from the Mittal attack. So he turned to practically anyone who could or would listen to him. His first choice was the workers' unions saying that a merger could lead to thousands of job losses.
The trade unions immediately took up his defence saying that if Mittal were allowed to buy Arcelor it would lead to thousands of job losses.
The politicians in Europe - especially France and Luxembourg - were quick to join the issue and French government officials began saying the bid would have to be examined in great detail to ensure that competition is not compromised in the region and that the workers' rights are protected.
With barely 10 percent of the global steel market and very little overlap in the markets where they are strong - Arcelor in West Europe, while Mittal is in 16 countries in East Europe, North America, South Africa and Asia - there is little reason for authorities of Europe to begin getting concerned about the impact of the acquisition.
The European Commission's silence on the affair is a clear indication that Brussels does not see a tremendous threat in this case and that the Commission is also not very happy about politicians interfering in the free market.
But the EC's silence does not stop the politicians, trade unions and even the media in Europe from attacking the bid. Even some companies that depend on steel - like carmakers - have expressed themselves against the deal, even though they have absolutely no locus standi in the matter.
It is only the financial industry that has come out strongly in favour of the deal. Ever since the deal was announced, Arcelor shares have jumped by over 30 percent, while Mittal Steel has gone up by nearly 10 percent. Several other steel makers have also seen their shares rise. The financial analysts say that the politicians, the governments and even labour unions should stay out of the controversy and let the markets, or at least Arcelor shareholders, decide if they find the Mittal offer attractive enough.
"For many years, Arcelor shares had been moving directionless and the company was grossly undervalued by the stock markets. Mittal, by contrast, enjoys a much higher market capitalisation. Now, Arcelor shareholders have to thank Mittal for the bid since it has helped increase the market capitalisation by over 30 percent," says an analyst in Paris.
The battle is expected to continue for some weeks and Mittal may very well walk off with Arcelor despite all the huffing and puffing. But whatever the outcome, the affair has once again exposed how European Union countries tend to adapt a special set of practices for themselves.