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Ispat International to Acquire LNM Holdings to Form Mittal Steel
Company
International Steel Group to Merge With Mittal Steel for Cash and Stock
ROTTERDAM, The Netherlands, and RICHFIELD, Ohio, Oct. 25
/PRNewswire-FirstCall/ -- Ispat International N.V. (NYSE and Euronext
Amsterdam: IST) today announced that it has agreed to acquire LNM Holdings N.V.
Following completion of the transaction, the company will be renamed Mittal
Steel Company N.V. Simultaneously, Ispat International and International Steel
Group Inc. (NYSE:ISG) announced today that their Boards of Directors have
unanimously approved a definitive agreement under which Ispat International and
ISG will merge. The combined Mittal Steel will be the largest and most global
steel company in the world and will be listed on the New York Stock Exchange
and Euronext Amsterdam.
(Photo: http://www.newscom.com/cgi-bin/prnh/20041025/NYM161-a
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LNM Holdings is one of the world's largest and most profitable steel companies
and also has substantial mining assets. Revenues were $9.9 billion and
operating income was $3.2 billion in the first nine months of 2004. The
company has annual total raw steel production capacity of over 32 million tons
and owns significant mining assets, annually producing approximately 18 million
metric tonnes of iron ore, 13 million metric tonnes of coke and 12 million
metric tonnes of coal. LNM Holdings believes it has opportunities to achieve
additional growth and cost reductions, particularly at recent acquisitions.
For 2004, the company expects steel shipments of approximately 26 million
tons(1) and revenues of approximately $14.5 billion.
Under the terms of the agreement with LNM Holdings, Ispat International will
issue 525 million new shares, valued at $13.3 billion at Friday's closing share
price on the NYSE, to the shareholder of LNM Holdings. The new shares will
comprise approximately 140 million class A shares and approximately 385 million
class B shares, which is in the same proportion as the Ispat International
shares currently held by LNM Holdings' controlling shareholder.
Under the terms of the agreement with ISG, ISG shareholders will receive $21.00
per share in cash and a number of Mittal Steel shares equal to $21.00 divided
by the average closing price of Mittal Steel for the 20 trading days prior to
closing, up to a maximum of 0.6087 shares and a minimum of 0.4793 shares. The
value in the merger would be $42.00 per ISG share, or $4.5 billion in the
aggregate if the average price of Mittal Steel shares for the 20 trading days
prior to the merger is between $34.50 and $43.81 per share. ISG shareholders
will be able to elect between cash and Mittal Steel shares, subject to pro
ration such that 50% of the total consideration will be in cash and 50% will be
in Mittal Steel shares. The closing prices of Ispat International and ISG
shares on Friday, October 22, 2004 on the NYSE were $25.34 and $29.68,
respectively.
The companies have signed a Letter of Agreement with the United Steelworkers of
America and the Independent Steelworkers Union.
Upon completion of both transactions, Mittal Steel will be the largest and
among the most profitable steel companies in the world.
-- Mittal Steel will have operations in 14 countries on four continents
and 165,000 employees
-- For the nine months ended September 30, 2004, Mittal Steel had pro
forma revenues of $22.5 billion, pro forma operating income of
$4.9 billion, and pro forma total steel shipments of 43 million tons.
-- For 2004, Mittal Steel expects pro forma revenues of over
$31.5 billion, pro forma operating income of $6.8-7.0 billion, pro
forma total steel shipments of approximately 57 million tons, pro forma
net debt of $3.2 billion, and pro forma earnings per share of
$7.20-7.40(2), based on approximately 704 million(3) shares of Mittal
Steel outstanding.(4)
Lakshmi N. Mittal will be chairman and chief executive officer of Mittal Steel.
Wilbur L. Ross, chairman of ISG, will become a Board member of Mittal Steel.
Aditya Mittal will be president, group chief financial officer and a Board
member. Malay Mukherjee will be chief operating officer. Rodney Mott,
president and chief executive officer of ISG, will become chief executive
officer of Mittal Steel's combined U.S. operations.
"These transactions dramatically change the landscape of the global steel
industry," said Mr. Lakshmi N. Mittal. "We are bringing together Ispat
International, LNM Holdings and ISG, one of the largest integrated steel
producers in North America, creating a global powerhouse. In recent years, the
steel industry has been characterized by predominantly regional consolidation.
This combination represents a significant step forward in the globalisation of
the industry."
Mr. Mittal continued, "The combined company will have excellent positions in
raw materials, particularly coal, coke and iron ore, as well as strong
positions in key end sectors. This combination also provides Mittal Steel with
a more significant presence in important industrialized economies such as those
in North America and Europe and in economies that are expected to experience
above average growth in steel consumption, including Asia and Africa. Finally,
I am particularly pleased that Wilbur Ross and Rodney Mott, who formed ISG and
transformed the U.S. steel industry, will continue to have key roles at the new
company."
Mr. Ross said, "This transaction achieves all our financial and business
objectives. It provides our shareholders with an excellent rate of return and
the potential for strong future appreciation. It accelerates by several years
our strategy to become a leading global steelmaker. By joining with Mittal
Steel, respected in the global steel industry for both its strategic vision and
operational excellence, we have provided our shareholders immediate value, as
well as participation in a new, financially strong, profitable global
enterprise with excellent growth prospects."
Mr. Aditya Mittal said, "We believe that Mittal Steel will be a leader not only
in terms of its global reach and operational excellence, but also among the
most profitable steel producers in the world. Mittal Steel's financial
strength will enable us to implement return-driven capital expenditure programs
at our plants and enhance our ability to pursue future transactions. Most
importantly, both the companies can share best-in-class practices at all
facilities, accelerating the competitive edge Mittal Steel has due to its
global management breadth and expertise."
Mr. Mott said, "For our employees and communities especially, both of whom have
experienced the contraction of the industry, this combination provides a strong
measure of stability and the greater potential of a financially sound and
secure steel company, with a diversity of operations in the United States and
internationally. Our scale and capabilities, strong synergies, and a dynamic
product offering will enable us to serve customers even better. This is an
exciting combination borne out of strength."
Mittal Steel's strategy will be to enhance long-term shareholder value both by
continuously strengthening its position as a low-cost, high quality steel
producer and by continuing to play an integral role in a globally diverse steel
industry. The company is well positioned in key areas that management believes
will experience significant growth in steel consumption. The combined company
will encompass all aspects of modern steelmaking to produce a comprehensive
portfolio of both flat and long steel products to meet a wide range of customer
needs. It will serve all the major steel consuming sectors, including the
automotive, appliance, machinery and construction sectors.
Ispat International operates in 6 countries in North America and Western
Europe, including the United States through Ispat Inland Inc. Ispat
International has annual total raw steel production capacity of over 18 million
tons and is targeting 2004 revenues of approximately $8.3 billion.
LNM Holdings operates in 8 countries in Europe, Africa and Asia. It has annual
total raw steel production capacity of over 32 million tons and is targeting
2004 revenues of approximately $14.5 billion.
ISG is one of the largest integrated steel producers in North America and among
the top ten globally. Since being formed in April 2002, it has grown rapidly
by acquiring the steel making assets of LTV, Acme Steel, Bethlehem Steel,
Weirton Steel and Georgetown. ISG has annual total raw steel production
capacity of approximately 20 million tons and is targeting 2004 revenues of
approximately $9 billion.
LNM Holdings Transaction Highlights
The Board of Directors of Ispat International has approved a transaction under
which Ispat International will acquire 100% of LNM Holdings in an all-share
transaction. This acquisition is subject to a number of conditions including,
among others, the approval of the shareholders of Ispat International. The LNM
Holdings acquisition has received the support of Mr. Lakshmi Mittal, who is
chairman of both companies and the controlling shareholder of Ispat
International and LNM Holdings, either directly or indirectly. In light of Mr.
Lakshmi Mittal's role at both companies, the Ispat International Board formed a
special committee of independent directors to represent the interests of Ispat
International's minority shareholders in evaluating and negotiating the terms
of the acquisition of LNM Holdings. The Special Committee unanimously approved
the Acquisition Agreement and unanimously recommended that the LNM Holdings
acquisition be approved by the Board of Ispat International. LNM Holdings has
declared a dividend of $2 billion to LNM Holdings' seller in the fourth quarter
of 2004. At year-end 2004, LNM Holdings is expected to have a post-dividend
net cash position (defined as cash and cash equivalents less payable to banks,
current portion of long-term debt and long-term debt) of approximately $100
million. The combination of Ispat International and LNM Holdings is expected
to be completed by the end of 2004. Following completion of the LNM Holdings
acquisition, Ispat International shareholders will own approximately 18.3% of
the combined company and LNM Holdings shareholders will own approximately
81.7%. Credit Suisse First Boston LLC and Houlihan Lokey Howard & Zukin LLC
acted as financial advisors to the Special Committee, and Shearman & Sterling
LLP and NautaDutilh acted as legal counsels. HSBC and Citigroup acted as
financial advisors and Cleary, Gottlieb, Steen & Hamilton acted as legal
counsel to LNM Holdings.
ISG Transaction Highlights
The merger with ISG is subject to approval by the shareholders of ISG and Ispat
International or Mittal Steel, depending on the timing of the shareholder vote,
as well as regulatory approvals and satisfaction of other customary closing
conditions. In addition, the transaction is subject to the completion of the
acquisition of LNM Holdings by Ispat International. The transaction is
expected to be completed by the end of the first quarter of 2005. Following
the completion of this transaction, ISG shareholders will own between
approximately 6.9% and 8.6%, depending on the average price of Mittal Steel
shares for the 20 trading days prior to the merger. Credit Suisse First Boston
LLC acted as financial advisor and Shearman & Sterling LLP acted as legal
counsel to Ispat International. UBS Securities LLC and Goldman, Sachs & Co.
acted as financial advisors and Jones Day acted as legal counsel to ISG.
Ispat International and ISG Third Quarter 2004 Results Reported
In separate announcements issued today, Ispat International and ISG released
results for the quarter ended September 30, 2004.
About Ispat International
Ispat International is the world's eleventh largest steel producer with
steel-making operations in six countries. Ispat International's operating
philosophy embraces both integrated mini-mill and blast furnace processes for
steel making. Its steel shipments have increased from 1.5 million tons in 1992
to 15.2 million tons in 2003 and were 12.4 million tons for the first nine
months of 2004. In 2003, Ispat International's consolidated sales, operating
income and net income were $5,441 million, $151 million and $66 million
respectively. For the nine months ended September 30, 2004, Ispat
International's consolidated sales, operating income and net income were $6,320
million, $1,243 million and $887 million, respectively. Ispat International is
currently listed on Euronext Amsterdam and the NYSE and, based on the closing
price on Friday, October 22, 2004 on the NYSE, has a market capitalization of
approximately $3.0 billion. For additional information on Ispat International,
visit http://www.mittalco.com/.
About LNM Holdings N.V.
LNM Holdings is one of the world's largest steel producers, and operates
steel-making and processing facilities in eight countries. LNM Holdings has in
recent years significantly increased its production and shipments of steel
products, primarily through the acquisition of additional steel producing
assets. LNM Holdings shipped a total of 12.3 million tons of steel and steel
products in 2003 and 19 million tons for the first nine months of 2004. The
company has acquired several steelmaking businesses over the past three years,
notably in Poland, the Czech Republic, Romania and South Africa. The company
has an integrated business model with steelmaking facilities in six countries
providing a diversified portfolio of flat and long products. Summary financial
information for LNM Holdings for the quarter ended September 30, 2004 is
attached. For additional information on LNM Holdings, visit
http://www.mittalco.com/.
About International Steel Group
International Steel Group Inc. is one of the largest integrated steel producers
in North America and among the top ten globally. It produces a variety of
steel products including hot-rolled, cold-rolled and coated sheets, tin mill
products, carbon and alloy plates, wire rod and rail products and semi-finished
shapes to serve the automotive, construction, pipe and tube, appliance,
container and machinery sectors. For additional information on ISG, visit
http://www.intlsteel.com/.
Investment Community Conference Call and Webcast
The companies will host a presentation to the financial community on today's
announcement. A telephone and webcast presentation will be available live at
9:00AM New York time / 2:00 PM London time. You may access the live webcast
presentation at http://www.mittalco.com/ or http://www.intlsteel.com/. The
conference call can be accessed by dialing (800) 599-9829 in the United States
or (617) 847-8703 outside the United States. Please ask to be connected to the
Mittal Steel/ISG conference call.
A replay of the webcast and the conference call will be available from 12:00
noon New York time / 5:00 PM London time on October 25, 2004 through 12:00 noon
New York time / 5:00 PM London time on November 8, 2004. You may access the
webcast replay at http://www.mittalco.com/ or http://www.intlsteel.com/. A
replay of the conference call can be accessed by dialing (888) 286-8010 in the
United States or (617) 801-6888 outside the United States. The replay passcode
is 42562223.
If you have any questions regarding the webcast or conference call, please
contact Paula Chirhart of The Abernathy MacGregor Group at (212) 371-5999.
Safe Harbor Statement
This press release contains "forward-looking" statements including statements
regarding benefits of the proposed merger, integration plans and expected
synergies, anticipated future financial and operating performance and results,
including estimates for growth, and expectations for our products and plans for
development and expansion of our pipeline. These statements are based on our
respective management's current expectations. There are a number of risks and
uncertainties that could cause actual results to differ materially. For
example, we may be unable to obtain shareholder or regulatory approvals
required for the merger. Problems may arise in successfully integrating our
businesses. The transactions may involve unexpected costs. We may be unable to
achieve cost-cutting synergies. Our businesses may suffer as a result of
uncertainty surrounding the transactions. The market for our products may
change or be impacted by competition, new data, supply issues or marketplace
trends.
For more detailed information on the risks and uncertainties associated with
Ispat International's and ISG's business activities see our respective reports
filed with the SEC. The companies undertake no obligation to publicly update
their forward-looking statements, whether as a result of new information,
future events, or otherwise.
Additional Information and Where to Find It
In connection with the acquisition of LNM Holdings, Ispat International will
publish and make available to shareholders of Ispat International, and file
with Euronext Amsterdam N.V., a prospectus. Investors and security holders are
urged to carefully read the prospectus regarding the acquisition when it
becomes available because it will contain important information and to
exclusively base their investment decision on this prospectus once available.
Ispat International intends to file with the Securities and Exchange Commission
a registration statement on Form F-4 that will include a proxy statement of ISG
and a prospectus of Ispat International and other relevant documents in
connection with the proposed transaction. In addition, Ispat International
will publish and make available to shareholders of Ispat International, and
file with Euronext Amsterdam N.V., a prospectus. Investors and security
holders are urged to carefully read the prospectus regarding the acquisition
when it becomes available because it will contain important information and to
exclusively base their investment decision on this prospectus once available.
Investors and security holders of Ispat International and ISG are urged to read
the proxy statement and prospectuses and other relevant materials when they
become available because they will contain important information about Mittal
Steel Company and ISG and the proposed transaction. Investors and security
holders may obtain a free copy of these materials (when they are available) and
other documents filed with the Securities and Exchange Commission at the SEC's
website at http://www.sec.gov/. Ispat International and ISG and their
respective executive officers and directors may be deemed to be participants in
the solicitation of proxies from the ISG stockholders with respect to the
proposed transaction. Information regarding the interests of these officers
and directors in the proposed transaction will be included in the proxy
statement and prospectuses.
All investment is subject to risk. The value of securities offered may go down
as well as up. Past performance is no guarantee of future returns. Potential
investors are advised to seek expert financial advice before making any
investment decision.
This press release does not constitute an offer to sell or a solicitation of an
offer to buy any security and shall not constitute an offer, solicitation or
sale in any jurisdiction in which such offering would be unlawful.
(1) Shipments at Ispat Polska Stal taken from March 5, 2004.
(2) Figures do not consider any purchase accounting adjustment.
(3) Assuming issuance of the maximum number of shares under the merger
agreement.
(4) Pro forma depreciation and amortization for 2004 is expected to be
approximately $800 million.
LNM HOLDINGS N.V. THIRD QUARTER 2004
FINANCIAL STATEMENTS
The following is summary unconsolidated financial information for LNM Holdings
N.V. for the third quarter of 2004. This information is unaudited and has not
been reviewed by LNM Holdings external auditors. Ispat International N.V. has
not independently verified any of this information.
LNM HOLDINGS N.V. - CONSOLIDATED BALANCE SHEETS UNDER U.S. GAAP
As at
September 30,
2004
In millions of U.S. Dollars
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents, including short term investments $2,158
Trade accounts receivable - net 1,371
Inventories 2,068
Prepaid expenses and other 677
Deferred tax assets 36
Total Current Assets 6,310
Property, plant and equipment - net 4,399
Investments in affiliates and Joint Ventures 330
Deferred tax assets 16
Other assets 95
Total Assets $11,150
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Payable to banks and current portion of long-term debt $351
Trade accounts payable 1,038
Accrued expenses and other current liabilities 1,287
Deferred tax liabilities 7
Total Current Liabilities 2,683
Long term debt 697
Deferred tax liabilities 629
Deferred employee benefits 97
Other long term obligations 722
Total Liabilities 4,828
Minority Interest 1,556
Shareholders' equity
Common shares 50
Retained earnings 4,096
Cumulative other comprehensive income 620
Total Shareholders' equity 4,766
Total Liabilities, Minority Interest
and Shareholders' Equity $11,150
LNM HOLDINGS N.V. - CONSOLIDATED FINANCIAL
& OTHER INFORMATION AS PER U.S. GAAP
For the Third For the Nine
Quarter Ended Months Ended
September 30, September 30,
In millions of U.S. Dollars, except other data 2004 2004
(Unaudited) (Unaudited)
STATEMENT OF INCOME DATA
Sales 3,965 9,942
Costs and expenses:
Cost of sales
(exclusive of depreciation shown separately) 2,458 6,119
Depreciation 103 264
Selling, general and administrative expenses 144 399
2,705 6,782
Operating income (loss) 1,260 3,160
Operating margin 31.8% 31.8%
Other income (expense) - net 13 51
Financing costs:
Interest (expense) (17) (47)
Interest income 19 40
Net gain (loss) from foreign exchange 8 7
10 --
Income (loss) before taxes 1,283 3,211
Income tax expense (benefit):
Current 190 419
Deferred 45 124
235 543
Net income before minority interest 1,048 2,668
Minority interest share of net income 184 402
Net income (loss) $864 $2,266
OTHER DATA
Total shipments of steel products including
inter-company shipments (thousands of tons) 6,696 19,031
LNM HOLDINGS N.V. - CONSOLIDATED STATEMENTS OF
CASH FLOWS AS PER U.S. GAAP
For the Third For the Nine
Quarter Ended Months Ended
September 30, September 30,
In millions of U.S. Dollars 2004 2004
(Unaudited) (Unaudited)
Operating activities:
Net income 864 2,266
Adjustments required to reconcile net income
to net cash provided from operations:
Depreciation 103 264
Deferred employee benefit costs 1 --
Net foreign exchange loss (gain) -- (1)
Deferred income tax 45 124
Undistributed earnings from joint ventures -- (31)
Minority Interest in the share of net income 184 402
Other operating expenses (6) (5)
Changes in operating assets and liabilities,
net of effects from purchases of subsidiaries:
Trade accounts receivable (86) (485)
Inventories (213) (533)
Prepaid expenses and other assets (139) (319)
Trade accounts payable 137 148
Accrued expenses and other liabilities 119 354
Net cash provided by operating activities 1,009 2,184
Investing activities:
Purchase of property, plant and equipment (186) (430)
Proceeds from sale of assets and investments -- 2
Investments in affiliates and joint ventures (11) (11)
Acquisition of net assets of subsidiaries,
net of cash acquired 8 (7)
Other investing activities -- 3
Net cash (used) by investing activities (189) (443)
Financing activities:
Proceeds from payable to banks 132 184
Proceeds from long-term debt -- 106
Payments of payable to banks (26) (200)
Payments of long-term debt (23) (127)
Dividend (150) (411)
Net cash (used) by financing activities (67) (448)
Net increase in cash and cash equivalents 753 1,293
Effect of exchange rate changes on cash 16 45
Cash and cash equivalent:
At the beginning of the period 1,389 820
At the end of the period 2,158 2,158
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DATASOURCE: Ispat International N.V.
CONTACT: investors, Mr. T.N. Ramaswamy, Director, Finance,
+44-20-7543-1174, or media, Ms. Nicola Davidson, General Manager,
Communications, +44-20-7543-1172, both of Mittal Steel Company; or Mr. Chuck
Burgess or Ms. Gillian Angstadt of Abernathy MacGregor Group, +1-212-371-5999;
or Mr. David Simonson or Mr. Lachlan Johnson of Merlin Financial,
+44-20-7653-6620, both for Mittal Steel Company; or investors, Mr. Blaise E.
Derrico, Manager, Investor Relations, +1-330-659-7430, or media, Mr. Charles
T. Glazer, Manager, Communications and Public Relations, +1-330-659-9121, both
of ISG; or Mr. Jeffrey Taufield or Mr. Todd Fogarty of Kekst and Company,
+1-212-521-4800, for ISG
Web site: http://www.intlsteel.com/
Web site: http://www.mittalco.com/