INDIA BUSINESS WORLD - APRIL 2007
The Month that was ...

ARCELOR MITTAL NOT TAKING OVER POSCO

South Korean media reports about the world's largest steel maker Arcelor Mittal eyeing a hostile takeover bid for Posco, the third largest steel company in the world, have been denied by both companies.

Posco, too, has has denied a Korean newspaper report that a senior Arcelor Mittal executive expressed interest in Posco's M&A strategy when he visited South Korea last month. "The Arcelor Mittal executive and Posco CEO talked about the consolidation in the global steel industry at that time but the executive did not mention Poscos's M&A strategy," a Posco official said.

The Korea Economic Daily on Friday reported that Arcelor Mittal could be interested in making a hostile takeover of South Korean steel maker. Citing an unnamed Posco executive, the local paper reported that Arcelor Mittal's interest in the Korean major's M&A strategy means the firm has put Posco on its M&A target list. Roland Junck, a member of Arcelor Mittal's management board, had met Posco chief executive Lee Ku-taek last month.

Notwithstanding these denials, analysts say Arcelor Mittal may be interested in Posco as a prime target for a takeover. Posco has a fragmented, foreign-dominated share ownership and is seen as a prime target for a takeover in the wave of global consolidation that began last year with Mittal Steel's acquisition of Arcelor Mittal."In terms of output, cashflow, size of debt, cheaper share prices, Posco may be very attractive to Mittal," says an analyst with Hyundai Securities. Shares in Posco fell 2.32 percent on Friday but had surged to an all-time high on Thursday amidst speculation of a possible takeover bid by Arcelor Mittal

Posco, on its part is not taking any chances. It is trying to shore up its defences to thwart any takeover bid, and in January, shareholders approved a proposal to ease rules on selling new shares to strategic partners. Its management claims that investors friendly towards it account for around 40% of the company's shareholding. The company has been trying to strike friendly alliances through cross holdings with other Asian steel makers. One such alliance is with Japan's Nippon Steel, the second biggest steel maker globally, who recently increased its holding in the Korean steel major to 5%.

If the Arcelor Mittal-Posco transaction goes through, it will increase Arcelor Mittal's steel capacity from around 113 million tonnes to 143 million tonnes, which will be 110 million tonnes more than Nippon Steel's 32 million tonne capacity.