Finally facing their waterloo?

Melanie Stern is section editor of Families in Business.

Behind the dazzling smiles of Lakshmi Mittal and his heir apparent Aditya is a grim determination to become the biggest steel producer in the world. Whether Arcelor and the French business community are to be persuaded has yet to be seen. Melanie Stern reports

As if the media were not spoilt enough by the news that family-controlled steel giant Mittal was out to buy French rival Arcelor, then the reaction from France certainly provided a veritable smorgasbord of gossip.

The French have, right from the off, been robustly against Mittal's €18.6 billion bid. Arcelor's head Guy Dolle accused Mittal's Indian chief executive Lakshmi of being "difficult to trust", his company "a model of the past", and he refused any dialogue with his unwanted suitor. So, what might otherwise have been a run of the mill account of corporate chest-beating has morphed into a somewhat darker account of xenophobia-laced protectionism.
 
It began in a relatively dignified manner. On January 29, two days after Mittal announced its intentions, Arcelor issued a brief statement unanimously rejecting the bid. Headlines immediately flooded the financial press with the news that Arcelor had turned down what it deemed as a hostile bid because Mittal undervalued the group. Nowhere in the statement was any mention made about valuations, satisfactory or not, or any material reference to the idea that Mittal's offer didn't serve shareholder interests. What Arcelor's board did say was that after a thorough analysis of the offer, it had "swiftly" concluded the two companies didn't "share the same strategic vision, business model and values". The mud-slinging that followed bore comparisons with 2002's PepsiCo's $21 billion bid for Danone, the family-controlled foods giant seen as a bastion of French corporate success – which France blocked. (Danone isn't even strictly French, having been founded in Spain by a Greek Jew.)

As things got messier, governments such as Luxembourg (a major shareholder in Arcelor and home to the company's largest employee base) and India waded in to take sides. In February, the Indian Chambers of Commerce said it was "appalled" at the "misplaced fears" the French and other European governments had about Mittal's bid, adding that its members overwhelmingly believed them to be based on nothing more than xenophobia. French finance minister Thierry Breton made noises about how worrying Mittal's bid style was. After some criticism he watered his position down, re-branding France as simply a concerned "public stakeholder". Arcelor seemed to hang its reservations on the fact that Mr Mittal had never provided anything but sketchy details of his plans and said it would now consider talks if they were furnished accordingly. Why, if they were so under-informed in the first place, had Arcelor's board rejected the bid so conclusively?

Lakshmi started making headlines in 2004 when family entities, Ispat and LNM Holdings, were merged to create the world's largest steel company. Born in India's Rajasthan to a steel-working business family, Lakshmi moved to Indonesia in 1976 and set up his own steel company. On joining the company, his son and heir apparent Aditya's inaugural move was to marshal the $775 million Ispat IPO, aged 28. The pair shot to the top of the rich list rankings with an estimated worth of $25 billion last year. They stand out somewhat in a line-up of corporate top dogs, being young, Indian and sporting dazzling Hollywood smiles. For a country as patriotic as France, seeing one of its most important economic assets taken over by such misfits just isn't cricket. But Mittal Snr has maintained a dignified silence and has been campaigning behind the scenes to raise support among the corridors of political power.
 
Tit-for-tat aside, perhaps the French could be forgiven their spiky rhetoric. The company employs 30,000 of its 98,000 steel workforce in France, and steel is one of France's most important industries. There's also the issue of owner-management. Mittal Steel is family-controlled despite being publicly listed. To many, this isn't a sparkling model of 21st century governance.
 
France's Breton was quoted as saying, "the real power in financial markets is the power of speech". So far, though, most of the words France has chosen only serve to hint at how little power the country feels it has over its dwindling national treasure chest.