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IP/06/725

Brussels, 2nd June 2006

Mergers: Commission approves acquisition of Arcelor by Mittal, subject to conditions

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of the company Arcelor S.A. (Luxembourg) by the Mittal Steel Company N.V. (The Netherlands), subject to conditions. Both companies are major steel producers. The Commission has found that the proposed transaction would not give rise to competition concerns in the EEA markets for most steel products, except for heavy section beams, a specific type of long carbon steel product. However, Mittal offered remedies that would remove the concerns identified by the Commission. In the light of the remedies submitted, the Commission has concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or a significant part of it.

Competition Commissioner Kroes commented "My job in all mergers notified to the Commission is to make sure that they would not harm competition in the industry, lead to price increases or result in less choice for business customers and final consumers. I am completely satisfied that, through the substantial remedies offered by Mittal, these requirements would be met".

Mittal Steel, controlled by the Mittal family, is the world’s largest steel producer. Mittal Steel is incorporated in The Netherlands and listed on the New York and Amsterdam stock exchanges.

Arcelor is the largest European steel producer and was created through the merger of the European steel producers Aceralia, Arbed and Usinor in February 2002 (see IP/01/1628). The group is listed on the Brussels, Luxembourg, Paris and Madrid stock exchanges.

The Commission's investigation has shown that the two companies’ activities are largely complementary, both geographically and from the product range viewpoint. In terms of geographic activities, Arcelor is principally active in Western Europe and South and North America, with only minor operations in Eastern Europe and Asia. By contrast, Mittal Steel is active principally in North America, Central and Eastern Europe, Africa, with only a minor presence in Western Europe.

In terms of products, Mittal and Arcelor activities in the EEA only overlap in the production and direct sale of a number of carbon steel products, and Mittal is not active in stainless or speciality steel where Arcelor is active. As regards carbon steel products, Mittal achieves the majority of its sales in long products (such as bars, beams and rods) while Arcelor is active mainly in flat products (such as plates and coils). Moreover, Mittal has limited activities in steel distribution, whereas Arcelor has a strong position in Western Europe.

As regards the impact of the proposed takeover on competition, the Commission’s investigation has revealed that the combined entity was not likely to give rise to competition concerns for most flat and long carbon steel products, due to limited increments in market share resulting from the combination of Mittal and Arcelor and due to the presence of a number of sizeable competitors active on each of the relevant markets.

The one exception was the market for heavy section beams, in which the Commission found that the combined Mittal/Arcelor would become the undisputed market leader with a significant share of the total EEA production capacity and limited alternatives for customers. The other competitors active on the market would be much smaller in terms of production capacity, geographic coverage and product range.

To remove these competition concerns, Mittal has offered to divest two Arcelor heavy and medium section steel mills, in Germany (Unterwellenborn) and Italy (Pallenzano), and a Mittal section and bar mill in Poland, together with related commercial and distribution assets. The three plants together account for around 10% of the total production capacity for heavy section products in the EEA.

The Commission has concluded that the remedies would remove the entire overlap between Mittal and Arcelor in sales terms and that these assets would be viable and capable of competing with the combined Mittal/Arcelor so that competition would be effectively restored. Mittal's remedies thus fully address the competition concerns the Commission had as regards heavy section beams.


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