7. Make up your own sentences using the words and word combinations given below.

To tread a careful line, to move on from smth., to split shares into categories, to keep smb. on board, to have arguments and rifts, to be headquartered, to overbook oil reserves, to move off the board, to flag access to, to scrap one’s dual-head structure, to spell out issues.

8. Split into two groups and discuss the following questions.

1. Why would a firm resist being bought by another firm, so that they would refer to such attempt as a “hostile takeover”?

2. What are three of the antitakeover strategies you could use?

3. What is a major benefit of an S corporation?

4. Suppose you want to start a day care centre where you and your friends could send their children. You do not want to make it a profit-making organisation and you want your friends to help in running the organisation. What form of organisation would you use?

9. If you look around, you will find people who are involved in sole proprietorships, partnerships, and corporations in your area. Since your career depends on such information, spend some time interviewing people from each form of ownership and get their impressions, hints and warnings. How much does it cost to start? How many hours do they work? What are the specific benefits? Share the results with your groupmates.

FINANCIAL TIMES OCTOBER 29 2004

Merger reveals details of mittal empire

There is nothing new in the steel magnate's hefty dividend, except it is no longer a private matter, say Peter Marsh and Peter Thal Larsen

Asked to explain the $2bn dividend he has taken following the creation of his new steel company, Lakshmi Mittal says there is “nothing new” in him receiving dividends of this order – only previously the payments were not publicly disclosed.

This week, Mr Mittal, already one of the world’s wealthiest men, created the world's biggest steel company by merging his current steel assets with International Steel Group of the US to form Mittal Steel.

The company will be listed on both the New York and Amsterdam stock exchanges and will be controlled 88 per cent by the Mittal family, with an expected market capitalisation of about $21bn.

Because of the requirements of stock exchange authorities, Mr Mittal will be forced to reveal far more about his steel empire than before, when most of his activities were shielded through being part of a pri­vate group. “This will be a big challenge for him,” says one metals consultant who knows Mr Mittal.

Data revealed this week for the first time by the Indian entrepreneur – who started his steel ventures 28 years ago – give a better guide as to which parts of his activities make the most money. They also provide the context for the dividend payment.

LNM Holdings, the largest part of Mr Mittal's existing operations, is this year likely to be the world's sixth most profitable steel company in terms of earnings per tonne, before interest, tax, depreciation and amortisation.

The ebitda figure of $162 per tonne – based on projected shipments for 2004 of 29m tonnes – gives LNM Holdings a highly respectable place in a league table of large steel companies’ projected profits, compiled by World Steel Dynamics, a US consultancy.

According to estimates based on Mr Mittal’s new disclosures, LNM Holdings is likely to return ebitda this year of $4.7bn, on sales of $14.5bn, an impressive ratio of 32 per cent that is well above the norm for steel companies.

Given that the $2bn dividend is coming out of this earnings figure, and that Mr Mittal is the sole shareholder, the size of the payment “does not seem inap­propriate”, according to one banker associated with the transaction.

Mr Mittal says: “This year we [LNM Holdings] have done well. Therefore the dividend is higher than before.” However, he is unwilling to shed light on previous payments, which are not available publicly.

The private LNM Holdings, together with Rotterdam-based Ispat International, a public company controlled by the Mittal family, form the LNM Group – the umbrella name for all Mr Mittal’s existing steel activities.

Before this week’s deal, LNM Group was already the second biggest steel company in the world, after Luxembourg-based Arcelor.

Most of LNM Holdings’ steel activities are in low-wage countries such as Kazakhstan and South Africa where operating costs are a fraction of those in western Europe and the US. In con­trast, Ispat groups together steel plants mainly in North America, Germany and France.

Unsurprisingly, ebitda per tonne – on the basis of expected shipments this year – for Ispat is substantially less than for LNM Holdings and comes in at an esti­mated $126 per tonne for 2004. The comparable figure for ISG, with all its plants in the US, is even lower, at $68 per tonne.

According to the data, Mittal Steel – formed from agglomerating all the various steel interests – is likely to have pro-forma 2004 ebitda per tonne of $128, making it joint 11 in the league table of industry profitability.

In structuring this week's mergers, Mr Mittal and his advisers had to come up with some innovative structures in order to take account of the differing levels of profitability.

In combining his steel interests into a single company, Mr Mittal valued LNM Holdings at a lower multiple of ebitda than Ispat, the group listed in Amsterdam.

Based on share prices on the day it was announced, the deal, which was struc­tured as an offer by Ispat, valued LNM at about $13.3bn – or less than three times its expected ebitda for 2004.

The terms reflect the relative risk of LNM's holdings. But they were also designed to remove any suspicion among Ispat’s minority shareholders that they were being strong-armed into a disadvantageous deal.

When it came to buying ISG, however, the combined Ispat-LNM had to offer a fuller valuation.

Based on current share prices, Ispat’s half-cash, half-stock offer values ISG at about $4.4bn, or about four times its projected 2004 ebitda. The offer was designed to guarantee ISG shareholders about $42 a share.

But given the uncertainties about how the Ispat-LNM deal would be received by the market, Mr Mittal insisted on a so-called collar that placed upper and lower limits on the number of shares Ispat would be required to issue.

By early afternoon yesterday, Ispat shares were trading below the bottom of the range, valuing each ISG share at about $41.39. ISG shares were trading at $36.35.