TCS Daily

Guess Who's Coming to Merger?

By Salil Tripathi - February 6, 2006 12:00 AM

Europeans claim to be fans of multicultural integration. But it is one thing to admire hummus or curry al fresco at an upscale restaurant in a European capital, and quite another to respond effectively to a foreigner who wants to buy your assets.

That, in essence, is what the current takeover battle involving the world's biggest steel groups - Mittal and Arcelor - is all about. Mittal, the world's biggest group, is based in Rotterdam; Arcelor, the second-biggest, is in Luxembourg, even though the French seem to be protesting the loudest. That's because Mittal is owned by and named for a man who grew up in rural India; Arcelor's shareholders include European aristocracy.

Fearful that an Indian, and not one of their own, might take over a large European asset, one that employs thousands of unionized workers, the French and Luxembourgois governments have responded vehemently, as if the Eiffel Tower - or whatever it is that Luxembourg is famous for - were on the block. And Lakshmi Mittal, the chairman of the Mittal Group, finds himself as unwelcome as an asylum-seeker. It doesn't matter if Forbes magazine calls him the world's third-richest person.

When Mittal announced his bid for Arcelor, the French responded with characteristic haughtiness. Describing it as "badly prepared," French Finance Minister Thierry Breton criticized the hostile bid. Arcelor's chief executive, Guy Dollé, went one step further: Arcelor was like a flower which must be protected from a company run by "a bunch of Indians," he said, hoping the French unions would follow suit and block the merger, even though the company is based in Luxembourg.

We are all supposed to be Europeans now, except that Mittal can't be; that is the logic on the Continent. Europe has found it harder to integrate outsiders than has Britain and America. Even as Europe integrates more within, it leaves out those without, erecting bigger barriers for those not born in Europe. As Europe protects itself more, the keen and the desperate seek all kinds of ways of entering Europe. In 1999, Fodé Tounkara, 14, and Yaguine Koita, 15, were found frozen to death in the undercarriage of a Sabena plane in Belgium trying to enter Belgium illegally, seeking to flee war, poverty, and lack of good schools in Conakry. They wrote an innocent, moving letter, fully aware they might die, asking Europe to open up, and let more like them in, so that they could lead better lives. In 2000, Jeremy Harding eloquently described the plight of the most desperate, in his moving book, The Uninvited: Refugees at the Rich Man's Gate. London had its own drama, when immigrants began clinging to fast-moving Eurostar trains to enter Britain.

Europe has tried the à la carte approach. In 2000, then-German Chancellor Gerhard Schröder announced a modest scheme to attracted software engineers (mainly from India) to Germany to boost its technological base. Juergen Ruettgers ran a particularly divisive campaign against that policy in North Rhine Westphalia, calling for kinder statt inder, or "Children, not Indians" in the run up, suggesting an alternative way to address the shortage of software professionals. This distrust for foreigners was coupled with the desire to make them discard their origins. France outlawed schoolgirls from wearing the hijab, correctly arguing that a child cannot take such decisions unless compelled by an adult; but did nothing to extend opportunities to Muslim immigrants, with the result that last fall the banlieus burnt; even those who were born in Europe but who look different, found it hard to get accepted.

Mittal's case is of course different; he is far removed from the car-burners. He boasts one of London's most coveted addresses, Kensington Palace Gardens, where he reportedly paid £70 million for a 12-bedroom home, a record price for a private home. Saray Design, an architectural firm that claims its inspiration from the Taj Mahal, brought master craftsmen from India to recreate a Mogul palace for him, including building an indoor swimming pool inlaid with semi-precious stones, with delicately carved marble screens surrounding it. Last year, according to the Washington Post, Mittal donated some £2 million to the Labour Party, making him one of the biggest donors to the party. (His fondness for Labour has been controversial: earlier in 2001, he paid £125,000 to the party; soon thereafter Prime Minister Tony Blair wrote a letter that, in effect, backed Mittal's bid for a Romanian steel plant. Blair said then that he was only supporting British interests. Mittal is an Indian who runs his global steel empire from a suite of offices in London; his company is usually described as based in the Netherlands, and the steel plants he owns are all over the world).

And for his daughter Vanisha's wedding, Mittal plonked down £30 million, and hired the 17th century chateau Villa le Vicomte; the engagement ceremony was at the Palace of Versailles. The chateau was "exceptionally" closed for a private party one summer evening in 2004 so that the wedding could go ahead for the exclusive invitees.

Maybe that's why the French can't forgive him. Mittal's billions cannot be enough to get him an automatic entry at the head table in Europe. He is the outsider, someone from the exotic east, who is trying to buy his way into the pecking order. If a grand duke or viscount rented the chateau in France for his daughter's wedding, or paid a huge amount for a posh address, the paparazzi would be at his door all the time, and his taste would even get praised, even termed charmingly eccentric. But it is the idea of a brown man, who grew up in rural India, knocking at their doors, trying to buy his way in - that's at the heart of the aristocracy's concerns. The sooner that changes, the better it will be for Europe.

The markets are backing Mittal: hedge funds like his approach; European bureaucrats have, so far, said they'd stay out of the wrangle; and if the Luxembourg government insists on basing his headquarters in that tiny principality, Mittal is ready to oblige. In Mittal's global vision, of building the world's biggest steel empire, such things are minor details.

Mr. Tripathi is a writer based in London who contributes frequently to the Wall Street Journal and other publications.


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