Coordinating International Communications for Controversial Merger
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Coordinating International Communications for Controversial Merger

On January 27 of 2006, Mittal steel chairman Lakshmi Mittal announced his company’s proposal for a $40 billion merger with Europe’s largest steelmaker, the Luxembourg-based Arcelor.

Paul Holmes

On January 27 of 2006, Mittal steel chairman Lakshmi Mittal announced his company’s proposal for a $40 billion merger with Europe’s largest steelmaker, the Luxembourg-based Arcelor. The strategic rationale for the merger was clear, but the political and public relations obstacles to a successful deal quickly became apparent, ranging from skepticism about takeover of a major European corporation by an Indian business to the “economic nationalism” of the French government, to the poison pill defenses mounted by the target company

U.K. financial consultancy Maitland was appointed on short notice by Mittal Steel, and working with its colleagues in the AMO network (a group that includes Euro RSCG C&O in Paris, Abernathy MacGregor in New York, and partners Hering Schuppener in Germany and Llorente & Cuenca in Spain) as well as Mittal appointed firms in key markets, set about devising and implementing the communications strategy for their unsolicited bid for Arcelor, the world’s second largest steel producer.

Maitland coordinated public relations efforts across eight countries during one of the most complex and high-profile transactions of recent years. The bid attracted exceptionally high and sustained media attention, around Europe and beyond, for more than 20 weeks as the Arcelor defense team mounted robust resistance, political controversy raged, and commentators discussed what the bid—and the reaction to it—meant for the future of globalization.

The communications challenge for Mittal Steel and its advisers was unprecedented, since there had been no similar offer for an established European company from a bidder whose roots were in the developing world, and early on in the deal, it became clear that many journalists knew little or nothing about Mittal Steel, despite its size and stature.

Arcelor’s senior executives saw the offer as hostile from the outset. The company’s board of directors called an urgent meeting on the afternoon of Sunday, January 29, at which it unanimously rejected the offer and recommended that its shareholders take the same action. The board claimed that Arcelor and Mittal did not share the same strategic vision, the same model for development or the same values.

The media were much more familiar with Arcelor and disposed to believe its negative messaging about Mittal as a company, including allegations about the quality of Mittal Steel products (as Arcelor’s French chief executive Guy Dollé put it, “We produce perfume, Mittal produces eau de cologne”), safety issues, and its relationships with employee representatives.

Dollé suggested that Mittal’s governance practices were very different from those in most of Europe, pointing out that the Mittal family itself controls 97 percent of the company’s capital, and that Aditya Mittal, the son of the company’s president was also its director of finance and its managing director. Moreover, Lakshmi Mittal’s shares had two votes each, a voting structure that was not allowed under the laws of Luxembourg, where Arcelor had its headquarters.

In the face of those charges, the public relations team had to carefully manage the profile and reputation of the Mittal family, particularly chairman Lakshmi Mittal, who in the past had made headlines after being named “Britain’s richest man” by The Sunday Times.

“Our immediate challenge was to focus our communications program on the compelling logic of the merger, targeting the shareholders of both companies, whilst trying to steer clear of emotional debates or personal attacks that were confronting our client,” says Philip Gawith of Mailtand.

The communications required from day one pan-European and international co-ordination, with Mittal listed in Amsterdam and New York and Arcelor listed in Spain, France, Luxembourg and Brussels.  Germany and the U.S. were also key, partly in their role as major capital markets but also as countries where Mittal Steel had significant operations.

It soon became clear that the French government would play an active role in the defense of the company. Arcelor was formed in 2002, the product of a merger between Luxembourg’s Arbed, France’s Usinor and Spain’s Aceralia, and at the time of the Mittal bid employed more than 32,000 people in France and Luxembourg.

By the end of January, the governments of both countries had pledged a joint defense against the Mittal bid. “This hostile bid by Mittal Steel calls for a reaction that is at least as hostile,” the prime minister of Luxembourg, Jean-Claude Juncker, told media after meeting with French President Jacques Chirac. And French industry minister François Loos was equally adamant: “We are opposed to the success of Mittal’s public offer for Arcelor,” he told the French Parliament.

The unions also took a hand. Trade unions from Belgium, France, Germany, Spain, Luxembourg and Italy declared their opposition to the takeover and the European Metalworkers Federation said it would lobby EU policy makers against the bid while national unions would contact politicians to “try to elaborate with them ways to prevent the takeover in a joint effort.”

It was clear that the transaction would be extremely complex from a regulatory perspective. The terms and documentation of the offer required the approval of Belgian, French, Luxembourg and Spanish securities regulators since Arcelor was listed on all four markets, and the Dutch securities regulator because Mittal Steel is a Dutch company. Antitrust filings were necessary in the EU, U.S., Canada and various other jurisdictions.

And in addition to clearing the regulatory hurdles, Mittal Steel had to overcome a wide array of defensive measures employed by Arcelor, including a concentrated effort to obstruct or delay the necessary regulatory approvals. Arcelor placed its recently acquired Dofasco into a stichting (a Dutch foundation that would require unanimous board approval for any sale), and later signed an agreement with Russian steel company Severstal, controlled by metals oligarch Alexei Mordashov, an unlikely white knight believed to have the backing of the Kremlin.

“From day one of the offer announcement, our strategy was to stress that Mittal Steel was keen to get to a friendly merger agreement that would mark a step change in the much needed and welcomed consolidation of the steel industry,” says Gawith. “Our consistent positioning throughout the deal period was to clearly distinguish Mittal Steel’s management with its business focus and integrity from the hostility and personal attacks coming from Arcelor’s defence team.”

Mittal’s senior management, led by Lakshmi Mittal, played a crucial part in the company’s “charm offensive” with key stakeholders. Both chairman Lakshmi Mittal and CFO Aditya Mittal provided targeted interviews and participated in round tables and press conferences with both executives. Over a five month period, many front pages and business section articles in trade, financial and business media across Europe and North America conveyed consistent messaging. The PR team also organized a press trip to Chicago, Mittal’s U.S. headquarters, where approximately 50 international journalists were briefed on the company’s business and allowed to tour one of the company’s plants.

The communications strategy was built on three pillars. First, the company sought to clarify the facts surrounding the merger proposal. So during the Chicago plant tour, Mittal demonstrated its ability to produce top-quality steel products that were by no means “eau de cologne.”

The PR team also ensured that no matter how emotional the attacks from Luxembourg became, Lakshmi Mittal and his communications team always remained friendly and repeated the benefits of the transactions for both shareholders and other stakeholders.

Finally, the PR team insisted on a one-voice policy, aligning the messaging of communications teams in eight countries so that the Mittal spokesman in Spain would give the same comment to the Asturian regional press that the Financial Times received from the Mittal spokeswoman in London—including background information that was only communicated off the record.

Not only did the team have to deliver that same message all over the world, it also had get that message out to the media before the day’s editorial deadlines, which in some European markets were as early as 4 o’clock in the afternoon.

Those efforts resulted in more than 3,000 articles were written across the eight countries where the majority of the coverage was focused (not including India, where there was huge interest).

It was also an approach that helped the company win over some crucial allies, including employee representatives from Mittal-owned steel companies. In various countries, unions and works councils deliberately shared their positive views about Mittal Steel with the press, based on the fact that Mittal had mastered a successful turnaround for its various plants and invested heavily, with corresponding benefits for the employees.

Arcelor shareholders were also coming around to the Mittal perspective. The more “poison pills” Arcelor implemented, the more shareholders felt they should be allowed a vote about such far-reaching agreements. It was the successful mobilization of shareholders that turned the tide in the deal, ultimately leading to a friendly merger.

On June 25, after an epic six-month battle, the Arcelor board unanimously recommended the €25.8bn merger with Mittal Steel. In late July, Mittal Steel was able to announce that with 92 percent acceptance, its offer had been successful and that a new steel company—a leader in Europe, Asia and North America—had been created with a global production capacity of over 100 billion tons.

A key element in this victory was the ability to execute and sustain a disciplined, intense and effective, multi-jurisdictional communications campaign in which Maitland and its partners played an integral role.

Ultimately, overcoming numerous poison pills from Arcelor and reputational attacks on both father and son, Maitland repositioned both Mittal executives in the public eye and broadened their credibility and business reputation.

Said Lakshimi Mittal after the merger was finally approved: “In America, it is just about shareholder value and profits…. In Europe, values, culture and tradition are important.”

 

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