Filed by Ispat International N.V.
Pursuant to Rule 425 under the Securities Act of 1933
and Deemed Filed Pursuant to Rule 14A-12 Under the
Securities Exchange Act of 1934
Subject Company: Ispat International N.V.
Commission File No.: 001-14666
On October 25, 2004, Ispat International N.V. issued a press release
relating to its agreement to acquire LNM Holdings N.V. to form Mittal Steel
Company and its agreement to merge with International Steel Group Inc.:
ISPAT INTERNATIONAL TO ACQUIRE LNM HOLDINGS
TO FORM MITTAL STEEL COMPANY
INTERNATIONAL STEEL GROUP TO MERGE WITH MITTAL STEEL
FOR CASH AND STOCK
-- Mittal Steel Will Be The World's Largest Steel Company, With Pro Forma
Revenues In 2004 of $30 Billion and Annual Production Capacity of 70 Million
Tons --
Rotterdam, The Netherlands, and Richfield, Ohio, October 25, 2004 - 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.
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
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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)
--------
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.
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Lakshmi N. Mittal will be chairman and chief executive officer of Mittal a
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
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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
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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.
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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 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 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 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 www.mittalco.com or 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
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London time on November 8, 2004. You may access the webcast replay at
www.mittalco.com or 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.
Contacts:
Mittal Steel Company ISG
Investors Investors
--------- ---------
Mr. T.N. Ramaswamy Mr. Blaise E. Derrico
Director, Finance Manager, Investor Relations
+44 20 7543 1174 330-659-7430
Media Media
Ms. Nicola Davidson Mr. Charles T. Glazer
General Manager, Communications Manager, Communications and Public Relations
+44 20 7543 1172 330-659-9121
Mr. Chuck Burgess Mr. Jeffrey Taufield
Ms. Gillian Angstadt Mr. Todd Fogarty
Abernathy MacGregor Group Kekst and Company
212-371-5999 212-521-4800
Mr. David Simonson
Mr. Lachlan Johnson
Merlin Financial
+44 20 7653 6620
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
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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 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.
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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.
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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
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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
=======
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LNM HOLDINGS N.V. - CONSOLIDATED FINANCIAL
& OTHER INFORMATION AS PER U.S. GAAP
For the Third Quarter For the Nine
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
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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, 2004 September 30, 2004
In millions of U.S. Dollars (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
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Net cash provided by operating activities 1,009 2,184
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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
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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
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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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