CROSS BORDER M&A - CASE STUDIES
ARCELORMITTAL acquires NSD Ltd in the UK with the help of Frenger International
Background
Arcelormittal is the world’s number one steel company with 320,000 employees in more than 60 countries. ArcelorMittal Distribution sells steel products to small and medium size customers from a network of regionally located depots. AMD is headquartered in Reims, France and generates annual sales of over €3 billion. AMD operates in 30 countries and currently employs around 5,200 people.
Although AMD had a strong presence in Continental Europe and in particular in France, Spain, Benelux and Germany, its UK presence was limited to a small operation with sales of less than £10m. Jacques Dham the Managing Director of AMD explained that several attempts to acquire businesses in the UK had failed in the past for a variety of reasons. Frenger International was called in to facilitate the acquisition of a significant steel distribution company in the UK. This initial acquisition would then be used as a platform to make further bolt-on acquisitions to expand the regional coverage and increase market share.
Frenger's role
The first part of our assignment was therefore to identify the major players in the steel distribution market in the UK. Our brief was to focus on companies distributing at least 50,000 tons of steel per annum. This threshold considerably reduced the number of potential targets. After validating the best options with AMD, Frenger initiated approaches to a small number of companies. Discussions with potential targets were engaged a few weeks after Mittal launched its own bid to acquire Arcelor. This major stock market battle which lasted until the summer 2006 had of course a significant impact on the speed of the negotiations with the selected targets.
Our task was to keep the discussions alive with the vendors and to reassure them on AMD’s commitment to complete a transaction despite sometimes little progress over several months.
Finally after nearly 20 months of effort the acquisition of NSD ltd was completed in early December 2007. NSD was an almost perfect match for AMD with its focus on the distribution of long steel products to a large variety of industrial customers and stockholders in the UK. NSD distributes annually around 130,000 tons of steel and generates sales of close to £60 million with a team of 110 people.
Conclusion
From the outset AMD was impressed by the quality and integrity of its management team headed by Paul Hart and Tony Levison. As part of the transaction, Paul Hart has agreed to stay on as country manager for AMD with the role of developing the business through additional acquisitions. The objective of AMD is to achieve volumes of over 500,000 tons in the UK over the next few years.
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