« Earnings from AFLAC and Fiserv | Main | Measuring Expected Return »

Most folks know that Bill Gates is the richest man in the world. And a lot of people are aware that Warren Buffett is second. But not many people, especially Americans, know about the #3 man Lakshmi Mittal.

Mittal is the CEO of the largest steel company is the world, Mittal Steel (MT). The company's stock is up more than 35% this year. Mittal is a tough businessman and he’s crushed his competition. But now he's up against his toughest opponent yet, the European elite.

Mittal is trying to buy pan-European steelmaker Arcelor, but the continent is in an uproar.

Writing is the Daily Telegraph, Ambrose Evans-Pritchard wrote Britishly: "Steel has sacred status in the iconology of Europe’s political and economic elite, if for nobody else."

Indeed. To the EU crowd, Arcelor isn’t merely a company. It’s the symbol of an integrated Europe. Unfortunately, Mr. Mittal has been unkind enough to remind the continent’s elite that symbol or not, Arcelor is a company. In fact, it has assets, much of which may be under employed, a situation Mittal hopes to correct. But he’s facing an uphill battle. Evans-Pritchard writes:

The Coal and Steel Community fathered by Jean Monnet in 1954 was the genesis of what became the European Union, and for a good reason. The French and Germans battled in 1870 and again in 1914-1918 for control of the grim smelting cities of the Moselle, deemed the strategic key to the Continent.

As a marriage of French, Belgian, Luxembourg, and Spanish components, Arcelor is exactly what the EU is supposed to be in the French political mind: a way of fostering industrial champions that bind Europe together and are big enough to give France leverage and clout on the world stage.

“If this raid succeeds, it will bring down one of the rare edifices of industrial Europe, proving that no position is secure any longer in a world of global competition,” said a Le Monde editorial yesterday.

It gets worse. Mittal is even guilty of acting like...an American:

Mr Mittal has not helped his cause with gauche extravagance. His style grates on French and Belgian sensitivities at every level, but especially for the workers of the Lorraine steel belt and the grim rusting hubs of the Meuse.

His £70m house at Kensington Palace Gardens - the most expensive in the world - is surpassed only, in the demonology of the French media, by a £34m birthday bash for daughter Valentine at Paris’s Chateau Vaux le Viscomte in 2004.

Some 5,000 bottles of Mouton Rothschild’s finest were washed down at a cost of £1.8m and Kylie Minogue pocked £320,000 for a half an hour’s turn.

This is how two cultures can see the same facts and reach vastly different conclusions. An American’s first thought would be "hey, if he's willing to pay that much for Kylie Minogue, think what he'll pay for my shares. Sell! Sell! Sell!"

Jean-Pierre Masseret, president of the Lorraine region, called Mr Mittal an asset-stripper bent on gutting France’s heavy industry.

"Mittal is lying when he says he won’t close any of Arcelor’s operations. He is buying a rival and could perfectly well destroy Europe’s steel industry, which he doesn’t need. The powers that be must take action to stop a stock-market raid that threatens Europe’s vital interests and its strategic future," he said.

Monsieur Masseret has a lot of Gaul. Has it ever occurred to him that not selling threatens Europe’s vital interests.

"The government must resort to all means possible to block this takeover," said Nicolas Dupont-Aignan, a leading deputy for the UMP party.

The French Left claims Mr Mittal has already shown his true by colours by shutting down Irish Steel’s operations in Cork as soon as his five-year guarantees elapsed, sacking all 450 workers and leaving the Irish state with a £21m clean-up bill for waste.

Mr Mittal sought to calm the waters in Paris yesterday. “We are not at war here. We’re a European company and this is a good way to protect European jobs in the future,” he said.

Yes, we’re all European. But some of us are more European than others, Lakshmi.

Whether the French can block the bid merely over fears of job losses is a contentious point. Under EU law, states can invoke “public interest” but only if there is a risk to national security, media freedom, and financial probity.

"Asset-stripping as such is not covered," said an EU official. "Nor is it enough to just say that national security is at risk. This has to be vetted by the commission, which can say no."

In reality, France could tie up the bid at the European Court for years to come. Whatever it says, Brussels cannot risk a spectacular bust-up with Paris just a year after the French people rejected the European constitution. Such a clash could tip the EU into a downward spiral towards disintegration.

If France’s president, Jacques Chirac, wants to keep Mr Mittal away from Arcelor, he can almost certainly do so.

His first move is an emergency meeting tonight with Luxembourg’s prime minister, Jean-Claude Juncker, who disposes of 5.62pc of Arcelor’s stock.

Mr Mittal may at last have met his match.

Posted by edelfenbein at January 31, 2006 6:20 AM