After five months of bitter resistance, the management of Arcelor, Europe's largest steel maker, last weekend agreed to a merger with Mittal Steel. If the deal goes through -- shareholders still have their say -- it will create the world's largest steel company. Equally important, the agreement could signal a shift in thinking in European boardrooms about stockholder rights. Perhaps most significant, however, the deal is a sign of new business realities: Expect more takeovers of established companies by "upstarts" in the new global economy.
Mittal Steel announced in January that it was prepared to take over Arcelor with an unsolicited $22.7 billion bid. Mittal is run by Mr. Lakshmi Mittal, who has built an empire purchasing failing steel plants around the world and turning them around through the adoption of practices that focused on standardizing production. The bid was fiercely resisted by Arcelor's management, which tried a variety of tactics -- from share buybacks to restructuring assets -- to fend off Mittal. Mittal only upped its offer. After the company raised its bid by 34 percent, Arcelor turned to a "white knight," Russian steel company Severstal, to help defeat the Mittal offer.
Mittal launched an aggressive PR campaign to unnerve shareholders about the results of any deal with the Russian company. That unease was compounded by Arcelor's seeming disregard for the terms of the Mittal offer.