Then in May Arcelor brought in a "white knight" in the shape of Severstal and its chairman and chief shareholder Alexei Mordashov, who had gained control of Russia's largest steel maker at the age of 30 during the Russian "privatisations" of the 1990s. At this point, many investors had turned against Arcelor and a petition signed by shareholders accounting for 30% of the company demanded a vote on the Severstal deal. Also, on June 2nd, Lakshmi Mittal wrote to Arcelor's chairman, Joseph Kinsch, offering a similar management and ownership structure to the one agreed with Severstal. This forced Arcelor to hold talks. Aditya Mittal led a three-man team, while Arcelor was represented by CFO Gonzalo Urquijo, deputy CEO Michel Wurth (Urquijo's predecessor as CFO) and senior executive vice president Roland Junck, in meetings held on "neutral ground" at hotels near Brussels airport.

Urquijo says of Aditya, "He was able to bring us closer to his company and the logic of the transaction. He is extremely knowledgeable about the sector. We felt we were in front of steel people not just finance people. Aditya is very impressive." Was it shareholder pressure or these three weeks of faceto-face meetings that turned the tide? "We will never know the answer," says Mittal. The meetings that his father held with the Belgian and Luxembourg presidents and other government officials played their part. The letter offering "a merger of equals....provided Arcelor management with a real choice," says Mittal. "But along with that, the shareholder base was getting galvanised and [Arcelor management] began to realise there was a lot of shareholder pressure."

A day before the official announcement of the new board, Aditya Mittal exudes the quiet confidence of someone holding all the cards. Asked about Dollé, he says in a gentle, somewhat chilling, voice, "He is no longer with the company." If the comments about his age and experience have bothered him, he laughs it off: "You know, at the first press conference in January everybody asked, 'Why are you the CFO of this business? Do you have the experience and the capability?' At the last press conference in July they said, 'Why don't you become CEO of the new company?' So, I guess I made some progress."

China On My Mind

Arcelor Mittal has been careful to point out that, while it's the world's largest steel company it still accounts for just 10% of global capacity. (See "Pairing Up")

Nonetheless, it is already bumping up against anti-trust concerns in the US, Europe and South Africa. In the US, it must sell one plant, either Weirton or Sparrows Point; in Europe, two "long products" facilities must be sold; and in South Africa, Mittal's dominance means it already is subject to price controls.

Nonetheless, the company has said that it plans to double production by 2015, from about 120m tonnes this year. "Clearly, we can't double ourselves in Europe and the US, but there is no question there are areas where we can grow dramatically," says CFO Aditya Mittal. "China and the rest of Asia account for half the global steel industry today and our presence there is negligible."

Mittal Steel became the first foreign company allowed a minority stake in a Chinese steel producer when it bought 37% of Valin Steel in 2005 for $338m (€262.5m). Earlier this year, Arcelor clinched a deal to acquire a 38.4% stake in Laiwu Steel for $260m.

While foreign companies are restricted from taking majority stakes, the Chinese government has been encouraging the domestic industry to consolidate. In August, it approved the merger of Laiwu and Jinan Steel (at the time of writing, it hadn't yet approved Arcelor's stake in the combined group). But the Chinese steel lobby has called for additional restrictions on foreign ownership, and domestic consolidation is expected to be led by large local producers, such as Baosteel and Wuhan Iron & Steel.

Mittal, however, believes the government will allow foreign expansion. "It is a process with the government," he says. "We're the first experiment. We have to demonstrate that we bring value to Valin Steel and to the Chinese steel industry. If they can see that over the next three to four years, I do believe they will allow us to take full control over the company."

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