V Pattabhi Ram
A fortnight ago Wafers had been excited like never before. Both the electronic and the print media had gone to town with the extraordinary story of a fifty something Indian taking the world by storm. And that was enough to set Wafers’ adrenaline flowing. She was willing to give the man a bear hug, if she could. After all, not every other day does an Indian gobble a global major, even if he happens to answer to the name of Lakshmi Mittal.
Somewhere she had read about her new hero: “In the monsoons he walked through waist high water to school because he didn’t have enough money for a rickshaw.” Wow! From there to being the world’s third richest man, just behind Microsoft’s Bill Gates and investment guru Warren Buffet was vintage stuff indeed.
To Wafers the story of Mittal acquiring Arcelor, the world’s number one steel company, represented the arrival of India in the global M&A market place. Ha, Merger and Acquisition now stands for Mittal & Arcelor she told herself in half jest. She had dug deep into the newspapers, the websites and what have you to find more about the deal.
She was pleased to learn with what she saw. Like, Mittal Steel had factories in 16 countries across four continents. Indian companies like Infosys and WIPRO included, were no patch on that. Like, the merger would mean a number two company acquiring a number one steel company. Wow, a case of the runner up upstaging the winner. Like, the new entity strategically, named Arcelor-Mittal, will now be privy to 10% of the world’s steel production. Its closest rival the Japanese steel merchant Nippon would be a distant second.
China had then mocked at her. “Look, don’t fly in borrowed feathers. Mittal has spent most of his life outside India. He isn’t an Indian citizen. He doesn’t carry an Indian passport. Your country never gave him the space to succeed. And now that he has gone offshore and succeeded spectacularly you are excited about embracing him as an Indian. Its sheer hypocrisy.
“China, you will always be cynical. You don’t love your country” Wafers had said with rare disdain.
China hadn’t finished as yet. “Mittal’s initial offer of 18.6 billion euros had been thrown out of the window. He was rebuked by the Arcelor management and had to up his offer by almost 40%. His final price is almost double of what Arcelor was trading in Jan 06.” As Wafers digested the information, China asked, “So what’s great about it? It was just a case of a money bag having lot of spare cash buying up a favorite toy.”
“He didn’t rob a bank, did he?” Wafers had thundered. “Look Arcelor-Mittal will be the only steelmaker to crack the 100 million annual capacity mark. That’s enough for twice as many automobiles as the world makes every year.”
China had bugged Wafers with his observation. “This is only the honeymoon period. Once Mittal gets down to the serious business of running the company he is going to run into roadblocks. It’s not going to be ball dealing with 320,000 workers. And then as the superpower there would be the additional responsibility of being a price fixer.” He had closed out saying “we will have to wait and watch before we get loony over Mittal”. Wafers had felt hurt. But she had decided to ignore it.
And to rub salt to the injury China reminded her of the famous merger between Time Warner and America Online. What had been billed as the big daddy of all mergers had soured in one year flat. The company in its first year of combined operation had reported the highest ever loss in corporate history! And the iconic Ted Turner had to put in his papers.
The clash with China was a fortnight old. Today, Wafers was sick and dejected. The enthusiasm and excitement of the last fortnight had gone. “Bloody Indians” she told China. It was a rare display of profanity. She was upset by the fact that the Congress government had cowed down to the pressure of Neyveli Lignite (NLC) employees. To quell the strike the government had given up its desire to sell 10% of its stake in NLC.
The irony of it all struck Wafers. On the one side the Indians were celebrating successful takeover by Mittal and on the other side its very our government couldn’t dispose of its own stake even when it was a miniscule 10% of the 93% holding.
“Why didn’t the government call the NLC employees’ bluff? And why should the employees bother? After all so long as the government had more than 50% holding it would still be a public sector company. She remembered the numbers from her corporate law classes. And why couldn’t the employees look at this as the equivalent of ESOP?”
The encyclopedic China volunteered a reply. “It is the fear of the unknown. People celebrate the fear so long as it happens to others. When it hits you personally you fight. Not just the NLC employees but everybody be it the media, be it the industry, be it professionals”.
Wafers disagreed. “Isn’t it unfair if an owner cannot sell a part of his holding to finance his private distress? Then where is the idea of market economy?” China agreed. But remarked, “In a complex country like ours, there are too many pulls and pushes. Every party in power has an axe to grind. You have to take the partners along. You have to prepare them for a decision. You must be adept in playing politics.”
“Crap” said Wafers. And asked, “Will they make the same noise if Mittal makes an open offer to Tata Steel? Will they go up in arms?” China was quick to reply. “No. Because Tata isn’t in the public sector. Then we will rejoice at the power of the market place! And if the price is right maybe, just maybe, neither the shareholders nor the employees will complain”.