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June 27, 2008

We are lucky to have the Mittals living in London - the Mittal's choice makes one proud to be British, says Richard D. North: Cold Steel: Britain's richest man and the multi-billion dollar battle for a global empire - Tim Bouquet and Byron Ousey

Posted by Richard D. North

Cold Steel: Britain's richest man and the multi-billion dollar battle for a global empire
by Tim Bouquet and Byron Ousey
London: Little, Brown, 2008
Hardback, £20

The Mittal boy makes good
A poor little Indian boy becomes the biggest and most famous steel magnate since Carnegie. That's roughly the marvellous story of Cold Steel. Though the account verges on the hagiographical, it is very well done. It's nicely paced and structured.

The bulk of the book concerns the Mittal family's 2006 battle for control of Arcelor, the world's second biggest steel firm. But the authors prime us on how this was a coming-of-age encounter, one that takes the Indians from an image of scavenging outsiders to the top table of international business. They trade up from fast footwork in Indonesian and ex-Soviet backwaters to finessing sophisticates in the Bourbon luxury of old Europe.

We really get to know Lakshmi and his son Aditya Mittal in 2005, when they're already hugely successful. They own London's biggest private house, 18-19 Kensington Palace Gardens (before that they'd lived in Bishop's Avenue, having moved there from Java). They have a vastly expensive hideout near St Moritiz, for the skiing.

Their firm produces more steel (but not more money) than any other in the world. They're in the Ukraine, trying to buy up a local steel firm, and they're head-to-head with Arcelor, which wants the Ukrainian firm too. It's all gorgeously shadowy, just as we like the eastern edge of Europe to be. (Kiev is indeed replete in busy little squadrons of blacked-out SUVs careening from deal to deal, and nothing is as it seems.) The Mittals win out over the Luxembourg-French-Spanish giant. But only just, and at an inflated price. They’d rather run their competitor than run against it.

The Mittal back-story
There are some slack journalistic tropes we could do without. We learn that Lakshmi's early childhood was spent within a sari's unwinding of the tram wires in the street outside. There is just the hint of a ramshackle middle class Indian life, a sort of Satyajit Ray moment. But the authors don't seem to know what they're dealing with. Either that, or they positively prefer their poor boy made good scenario. Within a paragraph or two of the tramlines, we find that Laksmi's father has managed to become the co-owner of a steel works and his uncles are in partnership in the same sort of game. In fact, we learn, the family is from the entrepreneurial Marwari caste.

In short, Lakshmi doesn't have the awful disadvantage of being too poor to be likely to succeed. Nor is he too rich. Instead, he has just the right springboard to success. He has exemplars, mentors, and a dash of edge. As a youngster, mucking about in a steel works seems to have been as familiar as going to Scouts or some such. He played managers when the rest of us were hardly past Meccano. For a while, indeed, the world-conquering model included Lakshmi's father and siblings. Lakshmi split off from the rest only in 1995, and it is clear that it was a breach he was only too glad to heal when the time was right.

And then we get to the ancient mystery. What makes a man really, really hungry? The wonder of Lakshmi Mittal is that his ambition was never sated. This book doesn't answer the riddle, and doesn't seem to wonder about it. Instead, it trails a cliché and then gets on with its love affair with the good looks, the calmness, the niceness of its hero.

What's odd is that the authors are persuasive on all these points. Lakshmi Mittal seems to be a pretty honest dealer, doesn’t have side or a chip, is graceful under fire. As the plot thickens, and he is subjected to French hauteur and even racism (at any rate loose-mouthed xenophobia) as well as all the other more normal tricks and ploys of a take-over war, but he doesn't lose his rag. He stays focussed and flexible and gets the result. It is, by the way, even more extraordinary that Aditya Mittal was working so well and so closely with his father. Perhaps the cleverer of the two, the son must be quite something.

Bucking up the market
Lakshmi may have been plain lucky. He was a steel man through and through and learnt his business methods in a thirty-year stagnant market. Steel use was constant but static from 1970 to 2000. In that time, new methods came along and whole state-subsidised empires were found to be stuck with massive outputs of poor or redundant product. The Mittals hoovered up these ramshackle plants. They demanded favourable terms and survivable environmental regimes, and they slashed costs. One imagined they slashed jobs too. But they save businesses. As rapacious capitalists go, the Mittals were saviours. Wherever they went, they could parachute in Indian managers who knew what a turnaround had to look like. When the boom came in the late 1990s, they had the right production at the right prices.

Reading this story makes you proud to be British. This is odd, really, since the Mittals only drive their business from London. If I understand the situation right, it's headquartered in Luxembourg and pays corporate taxes in the Netherlands. But hell, the Mittals live here, and we're lucky to have them. And besides, they seem in some obscure way to be a product of the British Empire.

Certainly, their approach to business was for years a hybrid of Indian and Anglo-Saxon modes. So they appalled the champions of the "social" Continental model of Arcelor, and the resulting deal seems to have been a useful cross-fertilisation of all the styles. It is interesting to note how the process was second-guessed from the sidelines by John Plender and Peter Marsh of the Financial Times, both inquiring fastidiously about governance. Doubtless they played a vital role, but I enjoyed seeing this deal from the deal-makers' point of view, with the Fourth Estate cast as voyeurs peering in from the sidelines.

Still, part of the richness of this story is the way in which the Mittals sacrificed some of the privacy and tightness of their family control, whilst Arcelor had to accept that there would never again be such cosy stitch-ups between governments, unions and banks. Maybe it's because I'm a Londoner, but I enjoyed seeing the triumph of the wide, transparent market. (And yes, I know the FT helps make it so.)

We see other wrinkles unfold. Cold Steel has lively portraits of the sharp-eyed opportunists who cruise in deal-infested waters. Bankers, lawyers, schmoozers, fixers, short-term investors, they all jostle with each other for places on – or are wooed by - one or other team in the Arcelor war.

Sharks swimming in the deal-custard
It's hard to pick the most delicious of this alphabet-spaghetti of a caravan. The brothers Michael and Yoel Zaoui must be near the top: determined rivals as financiers, and great gossips when the Chinese walls allow. And then there's Romain Zaleski, the Milan-based French-Polish investor who marks his successes in new purchases of medieval religious art. Fuelled by caffeine and expensive wine, swarms of consultants work out plans and contingencies and fall-back positions. There are stunts and larks and ruses. Effortlessly, we acquire a new grammar of White Knights and White Squires, and many more ploys. The Arcelor deal seemed to fast-fall through most of the available variations of M&A (mergers and acquisitions) before it emerges as the new conglomerate.

A great story
This is an account of how cultures and cash interact. It is about how even in the age of internet and biology, the old industrial revolution is still unfolding. It is about men and women imagining the financial instruments which will connect teachers' pensions to the opportunities lying asleep from the Yangtse to New York. I loved it.

Richard D. North is the author of Rich is Beautiful: A Very Personal Defence of Mass Affluence and Scrap the BBC!: Ten Years to Set Broadcasters Free.


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