Had it not been for his dislike of rising early, Lakshmi Mittal might have become an accountancy teacher, rather than the world's fourth richest man and the biggest maker of steel in history.
When he collected his degree from Calcutta's St Xavier's College in 1969, the principal told him: "Mittal, you start teaching accountancy from tomorrow," Mittal had just graduated with the highest marks ever achieved by a St Xavier's student in accountancy and commercial mathematics.
"OK," Mittal replied. "What time am I to come?"
"You have to begin with the first years at 6am." Mittal shakes his head as he tells the story. "'Six o'clock? I will not do that again,' I told him. 'I have done it enough in my three years as a student.'" And with that, Mittal instead joined his family's small steel business in the southern state of Andhra Pradesh, the "rice bowl of India."
Today, Mittal employs 310,000 people in 60 countries and is number four on Forbes's list of the world's richest people; only Warren Buffett, Bill Gates and the Mexican industrialist Carlos Slim Helú have net worths higher than Mittal's $45bn. In the world of steel—until recently seen as a sunset industry dominated by politicians and unions—he casts a longer shadow than any man since Andrew Carnegie, the Scots emigrant who built an enormous steelmaking combine in late 19th-century America. Following a bruising takeover of Arcelor in 2006, Mittal's company ArcelorMittal is the first steelmaker in history to produce more than 100m tonnes a year, and controls 10 per cent of the world market. It is three times bigger than its nearest rival, Nippon Steel of Japan. Mittal and his family own 44 per cent of the business, which is worth an extraordinary £27bn.
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Mittal's story is in many ways similar to that of Carnegie. Born to a relatively humble yet enterprising family, Mittal has made his fortune abroad rather than in the country of his birth. And, like Carnegie, he has always insisted on controlling his enterprises outright (although the Arcelor takeover has forced him to bend this principle slightly).
Mittal says that he is proud to be Indian, the first to make it entirely outside his own country. But he does not seem to set much store by the colour of his own passport, or anyone else's. It is hard to see him waving the Indian flag in the way fellow tycoon Ratan Tata did after his family conglomerate bought the Anglo-Dutch steelmaker Corus in 2006. Mittal talks about himself as a "global citizen." Since 1995 he has lived in London as Britain's richest "non-domiciled resident," and the one least likely to mind paying the flat £30,000 fee that the government is introducing for such non-doms. ArcelorMittal is headquartered in Luxembourg. Mittal's Gulfstream jet is always on standby; he regularly puts in more than a thousand flying hours a year, often visiting three countries a day.
While Carnegie was a larger-than-life figure—a political activist and, latterly, a philanthropist on an epic scale—Mittal is harder to pin down. On meeting him, you find that his manner is closer to that of a discreet GP than an empire-builder. "My aim is to build the most respected steel institution in the world," he says. Yet when asked what the company should be respected for, he lapses into corporate-speak: "Quality, management and vision." Mittal is relaxed and engaging company. He is very polite, in an old-fashioned way, and has an understated authority. But in meetings, his deep eyes are watchful, wary even, as though they are on an intelligence-gathering mission.
Mittal was born in 1950, the eldest of five children. With great prescience—or perhaps merely in hope—his parents named him Lakshmi, after the Hindu goddess of wealth. He grew up in Sadulpur, a town of 80,000 people in the Thar desert in Rajasthan, northwest India. The family house, a modest concrete building, had been built by his grandfather, a small-time commodities broker.
The Mittal family is of the Marwari ethnic group—the name originates from the Sanskrit word for desert, maru—as are many of India's big industrial families, such as the Birlas and the Jindals, both of whom moved from Rajasthan to Bengal to make their fortunes. Mittal was six when his family also moved to Calcutta. "Bengalis wanted to enjoy the easy life," says Lakshmi's father, Mohan Lal. "Marwaris came from Rajasthan and had nothing to eat."
Marwaris believe in family-owned companies, with children, brothers and sons-in-law mucking in to run operations, oversee factories or plot deals; holding a minority position in a company is not their style. Mohan Lal and his five brothers had started their own business, first trading in steel, and later winning a licence to build a rolling mill in Andhra Pradesh. It was the family's first manufacturing venture. Mittal, still based in Calcutta, would visit the mill during holidays to study how it was run. Other mills followed, and the family firm—named Ispat after the Sanskrit for steel—grew and prospered.
Mittal's big break came in 1975, aged 26. The family had started to look for opportunities overseas, and had bought up some rice paddies in Surabaya, on the Indonesian island of Java, aiming to build a steel mill there. The plans came to nothing when it proved impossible to get the necessary building permits and electricity supply, and so Mittal was sent to Indonesia to sell the land. But seeing a chance to prove himself, he ignored his instructions and started planning to revive the venture. "I went to the retail market to see the prices of bars [steel for making gears, tools and engineering products] and rods [used to reinforce concrete], and saw there was a good margin in the business." He would undercut the competition, imported Japanese steel, by building a so-called mini-mill—an electric arc furnace fed with enriched iron ore pellets—rather than the bulky coking plants and blast furnaces traditionally used to turn raw iron ore, coke and limestone into steel. This technology would revolutionise traditional steelmaking. The snag was that Mittal had no cash. India's exchange controls prevented him from exporting capital. But then he discovered an Indian scheme that would allow him to invest overseas. He could buy equipment and materials in India, export them to Indonesia, and the Indian government would lend him up to 85 per cent of the cost against the export. Mittal put together the deal, sweet-talked the Indonesians into giving him the necessary permits and electricity supply—and he was away.
Surabaya opened in 1978, and was immediately profitable. Yet 11 years later, its steel production had reached only 330,000 tonnes a year—respectable, but a flea bite in terms of global production. By then a 39-year-old father of two, Mittal realised that he did not have the time to build more plants from scratch. So he resolved to buy up other people's. This was a rational economic decision in what was then a depressed industry, where many plants were valued at far below what it would cost to build a new one.
Mittal's first target was in the Caribbean— the state-owned Iron & Steel Co of Trinidad and Tobago (Iscott), which was facing bankruptcy. Iscott was co-managed by 60 Germans from Hamburger Stahlwerke, for whom the firm had to pay $20m a year. The contract was due for renewal in 1989, and Trinidad's government put it out to competitive tender. Mittal saw his chance. He promised to run Iscott profitably by increasing production and slashing costs. He got his deal, adding one special condition: the government should give him an option to buy Iscott on favourable terms after five years. Instead of expensive Germans, he hired 60 Indian managers, who cost the firm $2m rather than $20m and who worked themselves and the workforce harder. Mittal later bought the plant outright.
From Trinidad, Mittal moved on to Mexico. Then, as central and eastern Europe emerged from communism, he snapped up ailing state-owned mills in Romania, Poland and the Czech Republic with loans from the European Bank for Reconstruction and Development and funding from HSBC and Credit Suisse, turning them all to profit in record time. Then, in 1994, Mittal broke away from the family fold. He wanted to take the business global, while his father and brothers wanted to keep India as their main focus. Mittal still won't talk about the split. The two halves of the Mittal clan did not to speak to one another for two years. The other steel business, still run by his brothers, is referred to by Mittal's people as "a competitor."
Being a successful steel tycoon was not enough for Mittal. By now he had a bigger vision—one that was to turn the industry upside down. In 1998, he told the elite of the steel business at a meeting in New York that to break free of its history of boom and bust, the industry had to consolidate into a small number of giant companies with global reach, as its suppliers and customers had already done. The industry's current make-up—thousands of national and often state-owned corporations, propped up by governments and serving only local markets—was unsustainable. Mittal was greeted with silence.
Some dismissed him as an Indian spiv and asset-stripper. When he bought the vast rustbucket plant at Temirtau in Kazakhstan in 1995, the Wall Street Journal rubbed its hands in grim anticipation, calling the move "Mr Mittal's Waterloo." The Kazakh economy was in ruins, the plant's workers had not been paid for months, the heating and transport systems didn't work. The safety record of the mines—where 27,000 workers produced the coal and iron ore to feed the steel plant's blast furnaces—was abysmal.
Once again, Mittal brought in trusted Indian managers—many of whom had trained in Russia in Soviet times. He remotivated the workforce by paying them in cash. Soviet-era working practices were scrapped, the heating was turned back on and trams put back in service. Production doubled in a year.
Mittal does not always get it right. But when things don't work out, he cuts his losses swiftly. In 2001, he closed a steel plant in Ireland with a few hours' notice after having investing €44m over five years. The EU and the Irish state were left with closure costs of over €57m, and 400 jobs were lost.
The safety of Mittal's Kazakh mines is also a sensitive issue. In December 2004, 23 miners died in explosions caused by faulty gas detectors, and this January, 30 were killed in another accident. In both cases, Mittal went to the scene and paid speedy and generous compensation to the families of the victims. When Aditya, Mittal's son and right-hand man, was asked why his father did not close the mines until the safety equipment could be modernised, he replied: "What about the 30,000 people who work there?"
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He invited Dollé to dinner at his London home on Friday 13th January. "There is only one thing we can do for the benefit of both companies and the steel industry, and that is to merge," Mittal told him. "Where we are strong you are weak, and you have great strengths that we don't have. If we joined forces we could become a great steel champion." Dollé's reaction was to raise his bid for Dofasco in the hope that acquisition would put his company beyond Mittal's reach. But a fortnight after the meeting, Mittal launched a hostile €18bn takeover bid for Arcelor.
The European company was not easily overwhelmed. It fought back with the mother of all defences, giving money to shareholders in bumper dividends and offering to buy back some of its own shares. But its thinking was anachronistic. Although Arcelor was an international company in which governments had only a small stake, Dollé asked the French and Luxembourg governments to help fight off Mittal. While France obliged to the extent of blustering publicly about the "European way of doing things," Luxembourg ended up being neutral. As the single largest shareholder, the tiny grand duchy wanted to be protectionist, but as one of Europe's financial capitals, it felt it could not afford to be. Meanwhile, Dollé let his mouth run away with him. Speaking on French radio, flush with the success of his opening soundbite that Arcelor's technologically advanced steel was "fine perfume" compared to Mittal's shoddy "eau de cologne," he unwisely vowed never to sell Arcelor to a "company of Indians" paying with "monkey money."
Mittal's response was masterful. He wooed French billionaire François Pinault, owner of Gucci and a capitalist of far greater substance than Dollé, on to his board. Pinault, self-made like Mittal and not part of the establishment, announced he was taking a stand against the xenophobic hysteria of those of his countrymen who saw themselves as "economic patriots." Mittal also raised his offer to €25bn.
As Mittal circumvented each line of Arcelor's defence with diplomacy, clever footwork and hard cash, the company was forced into ever more desperate measures. Finally it put itself in the ludicrous position of seeking to evade Mittal's takeover by railroading its own shareholders into selling Arcelor on the cheap to a Russian oligarch, Alexey Mordashov. The shareholders rebelled, and the game was up.
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In some ways, Mittal seems well attuned to the modern global world. He is rational, decisive and capable of running companies across different cultures. But in other respects, he is quite old-fashioned.
He retains a strong Marwari sense of family. His 32-year-old son Aditya was at his side throughout the Arcelor bid. Mittal was so distressed when Aditya left home to attend Wharton Business School in America that he wouldn't see him off at the airport. When Aditya returned in 1997, after a spell as a banker at Credit Suisse, Mittal put him in charge of mergers and acquisitions. Critics cried nepotism. How could anybody so young have the clout and experience required to do such a job? But Mittal seems to have spotted a natural dealmaker. "I am very proud of Adit," says Mittal. "We understand each other very well as father and son and colleagues. Both can be very delicate relationships, but we have very good alignment. I have no problems about him following in my footsteps. In fact, I am following in his. He is the future." Father to son is the Marwari way.
Equally important is Mittal's wife Usha, whom he married when he was 21. She is much more than a regal consort. When Mittal expanded his empire, Usha ran the plant in Indonesia. "She knows and understands this business very well," he nods proudly. Usha Mittal is also rumoured to handle all the family's private investments, many of them hidden away in tax havens, such as the Dutch Antilles.
Family became a sticky issue during the Arcelor battle. Critics said that Mittal Steel—where Mittal's daughter Vanisha is also on the board—was too family-dominated to be properly accountable to shareholders. When Dollé made his unfortunate remark about "monkey money," it was partly to highlight the fact that the shares the Mittals were offering in payment for the bid carried fewer votes than the family's own shares. This would have ensured that the Mittals ended up with a clear majority in ArcelorMittal.
"Most successful businesses are family businesses," Mittal insisted. But the mud started to stick—partly because of Mittal's own record. Some years before, in 1997, Mittal had split his steel interests into two companies—one of which (Ispat International) he floated on the stock market, while the other was kept private. The two entities were merged in 2004 to form Mittal Steel. The snag was that while the private company had done very well over those seven years, the quoted company's shares had gone nowhere. Over the same period, shares in Usinor (the French company which later combined with Aceralia of Spain and Arbed of Luxembourg to form Arcelor) had risen by almost a third.
How had this come about? There are two parts to the answer. First, Mittal kept the Kazakhstan business out of Ispat when it was floated because bankers told him it was too risky. But it became very valuable. Second, after Ispat was floated, Mittal bought plants in Romania, Poland and South Africa for his privately held LNM Holdings, and they also rocketed in value. Why, critics asked, were these businesses not put into Ispat? After all, the prospectus said: "the company has been advised by the controlling shareholder (Mittal) that he does not intend to participate in any significant acquisition of steel and steel-related companies except through the company." The Mittals said that Ispat had been offered the assets but didn't want them. Its independent directors thought that Ispat wasn't financially strong enough to buy risky companies.
This was fine as far as it went. But it raised questions about Ispat's corporate governance standards and the independence of its directors. After all, they seemed to have turned down not one but several deals of a lifetime. What's more, these were the same directors Mittal intended to put in to run ArcelorMittal should his bid be successful.
Mittal's bankers at Goldman Sachs repeatedly told him he must relinquish majority ownership and preferential voting rights for his bid to succeed. "Adit, and I, the family, will decide," Mittal said. But in the end, the family surrendered its rights. That said, with 44 per cent of the ArcelorMittal shares, no one doubts that Mittal retains the whip hand.
Another dynastic side to Mittal can be seen in the contrast between his private frugality and more public ostentation in matters which tend to concern family pride. For instance, Mittal says he will not wear a Savile Row suit, and he is generally seen in public in a simple, off-the-peg number. Yet he spent £57m on his London house in 2004 and a rumoured £34m on his daughter's wedding. Aditya recently offered an alleged £200m to buy the house across the road from his father in London's "billionaire's row," by Kensington Palace. The owner of the house, a wealthy estate agent, turned him down.
In 2001, Mittal gave the Labour party what was in his terms a modest donation of £125,000. This created a storm because it coincided with a letter Tony Blair wrote to Romania's prime minister supporting Mittal's takeover of state-owned steel company Sidex. "Steelgate" was born, with Blair attacked for supporting LNM—a Dutch Antilles-registered company with very few British employees—even though it was a major competitor to Britain's biggest steelmaker, Corus. Adam Price, a Plaid Cymru MP critical of Blair's links to Mittal, described Blair's support of a "foreign competitor" as "extraordinary."
Yet despite the fuss, Mittal was not only unrepentant; he pressed on with his support, giving the party £2m in 2005 and another £2m in 2007. Mittal's explanation was simple: he admired Blair as a statesman. "He did many great things for his country," Mittal said. He has not courted Gordon Brown.
Mittal is certainly keen to be seen outside the world of steel as a man of standing and influence. He has assiduously added to his list of influential friends. His annual party at Davos attracts global politicians and business leaders. And he has recently added to his portfolio that quintessential piece of British super-rich bling—the football club. Last December, the Mittal family bought up 20 per cent of Queens Park Rangers, with Mittal's son-in-law Amit Bhatia joining Bernie Ecclestone and Flavio Briatore on the board.
Most striking has been the way Mittal is now welcomed in France, less than two years after being snubbed during the Arcelor bid battle. In October 2007, when he presented a rare bronze Indian statue to the Guimet Museum in Paris, standing at his side was President Sarkozy. Only that May, Sarkozy had commented that after the ArcelorMittal deal, French industrialists "now had to bow to Indian industrialists so as to get a good price for steel." In January, Sarkozy paid a state visit to India to put right the damage the Arcelor bid had done to France's trade with the subcontinent. Mittal was invited to join the president's entourage. So the Indian who the French didn't want taking over their company ended up representing the French on a state visit to India.
But what of the grand vision? Having built his Carnegie-style behemoth, can Mittal make it work? He is, after all, operating on a global scale, whereas Carnegie's company was national in scope. In ArcelorMittal's first year, the omens were encouraging. The company raised its earnings before interest, tax, depreciation and amortisation by 30 per cent. But not everybody is convinced. "In mergers of this size, it takes five to ten years to say if they have been successful or not," says Dollé, who left Arcelor as soon as Mittal won the war. He cites the Gandrange plant as evidence. Mittal bought Gadrange, located in Lorraine, from Usinor in 1999. During the Arcelor battle, Mittal gave the press a tour to show how the plant had been turned round. This January, Mittal announced it was closing, at a cost of 600 jobs.
Carnegie is now remembered as much for his philanthropy as his business acumen. He gave $350m to charity during his lifetime, underwriting vast philanthropic projects. He endowed 3,000 public libraries and 7,000 church organs. He campaigned tirelessly for better education and the abolition of the British monarchy. With Mittal, however, beyond an interest in James Bond movies and his family, there's little sign of a hinterland outside business. Unlike Bill Gates and Rupert Murdoch, he does not have a set of values to preach. He is sponsoring young Indian athletes hoping to compete at the London Olympics in 2012 and funds poverty-alleviation charities back home, while Aditya has given £15m to Great Ormond Street Hospital. But apart from these activities, Mittal has shown no desire to share a humanitarian stage with Bono or to give away his wealth to good works. He is an old-school tycoon whose goal remains simple: keep steel on the up and the address book bulging. "There is always great work still to be done," he is fond of saying.
In 1889, Carnegie published an article entitled "Wealth" in the North American Review, which argued that the life of a wealthy industrialist should comprise two parts. The first was the accumulation of wealth, while the second was to be used for the subsequent distribution of this wealth to benevolent causes. Could one imagine Mittal writing such an article? While popular legend typecasts Marwaris as tight-fisted, wealthy traders, they have tended to give lavishly to their home and adopted towns, often providing generous endowment to schools and hospitals. Mittal has made more money than Sadulpur could ever absorb. What he ultimately does with it—and whether there is indeed a second Carnegie-style act in this remarkable story—he will probably argue that it is something for the family to decide.
