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Dofasco’s foray into the mergers and
acquisitions world came within its first
year of operations with a big leap, a
merger with Hamilton Malleable Iron to
become Dominion Steel Foundry. The
move foreshadowed the eventual pace
and determination of the company.
Despite Dofasco’s acquisitions over the
years including mines, other segment
producers and steelmakers, no deal over
the century can trump what happened
between January and June, 2006 when
Dofasco found itself the object of desire
of the industry’s biggest players.
Beginning in the 1990s, significant
change was afoot in steel. Historically,
steel had been established largely by
state-owned enterprises – nationalistic
endeavours supplying customers within
close proximity. As the global economy
emerged and market boundaries faded,
consolidation began to take hold. And
no one was as fleet footed as Lakshmi
N. Mittal, who had deftly completed 47
acquisitions over the 15 years leading up
to the winter of 2006.
Consolidation held the promise of
reducing overcapacity in the market,
and leveling out the cyclical tendencies
of price due to the ability to better
manage markets and respond to the
demand for steel.
In Hamilton, signs of consolidation were
on the horizon by the mid-90s and work
was being conducted to take a longer
term view of the industry and what
Dofasco’s place in that new paradigm
might be. As a smaller independent
steelmaker, despite its access to the
big NAFTA market, the company was
challenged in its ability to drive and
secure new technology. Joint ventures
became more common – with Stelco
(
now United States Steel), NKK (now JFE
Holdings) and Sollac (which was acquired
by Arcelor). It would take more than
partnership to solidify Dofasco’s future in
the global steel game.
As 2005 came to a close, it’s unlikely
that anyone in Hamilton could predict
that Dofasco’s name would be front
and centre during the steel industry’s
biggest consolidation period in history.
It began, and ended, with a bidding war
–
first between Arcelor SA, based in
Luxembourg and Thyssenkrupp, based in
Germany. Arcelor and Thyssenkrupp were
also companies of consolidation with
Arcelor having been formed from the
former Aceralia (Spain), Usinor (France)
and Arbed (Luxembourg) in 2002 and
Thyssenkrupp through a merger of
Thyssen AG and Krupp.
Arcelor and Thyssenkrup fought hard for
Dofasco, with Arcelor eventually wooing
shareholders with a $5.6 billion offering
for the company. But as executives
from both sides celebrated the new
partnership on January 25, 2006, a much
bigger competition was emerging in
Europe as Mittal Steel went public with
an offering to acquire Arcelor SA just two
days later.
It would take five months, involve
governments across the globe,
shareholders on several exchanges
and complicated negotiations, with
Dofasco key in the discussions. Early in
negotiations it seemed the acquisition
of Dofasco could create competition
issues, a common occurrence in large
mergers. While Mittal Steel’s first
preference was to ensure Dofasco stayed,
one option that became public was to
sell Dofasco to Thyssenkrupp once the
Arcelor Mittal deal was struck. As a result,
for the duration of the negotiations
employees were unsure of which way
the ball would bounce and to whom they
would soon belong.
Eventually, on June 26, 2006 Lakshmi
N. Mittal, chairman of Mittal Steel and
Joseph Kinsch, chairman of Arcelor
SA, would appear on stage together
in Luxembourg to announce a merger
between their respective companies.
Dofasco was brought into the fold
through the divestment of a facility in the
U.S., Sparrow’s Point, to fall into line with
competition regulations.
With the dust settled and a deal done,
Dofasco set out to join its new team – a
global conglomerate that at its outset
spanned 60 countries and boasted
320,000
employees. ArcelorMittal was
now the world’s #1 steel company and
Dofasco could spread its wings over the
global landscape.
The deal of the century
Lakshmi N. Mittal, chairman and chief executive
officer of ArcelorMittal, launched the company’s
new brand at its 2007 leadership conference in
Cannes, France.
.