Arcelor ties with SeverStal, thwarts Mittal bid

By agencies   |   Friday, 26 May 2006, 07:00 Hrs
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LUXEMBOURG: Arcelor SA steel merged with Russia's SeverStal to form the world's largest steel company and fend off Mittal Steel's takeover bid.

Luxembourg based Arcelor and Moscow based SeverStal announced that the deal values Arcelor at $56.19 per share, nearly 37 percent more than its closing price.

Under the terms of the deal announced between Arcelor and Russia's largest steel maker, Arcelor's stockholders are to own 68 percent of the merged company. The deal would propel Arcelor, now the number two steel maker, past industry leader Mittal as a company with Euro 46 billion in sales and 70 million tons of production, based on Arcelor's and Severstal's 2005 results.

Severstal is headed by Russian billionaire Alexei Mordashov, who will become the largest shareholder of the new company, with 32 percent of its stock. He will become the non-executive president of the board of directors with the right to nominate six of 18 board members.

Under the agreement, Mordashov transfers his Severstal assets as well as 1.25 billion euros to Arcelor. In return he receives 295 million 44-euro shares in the new company and may not sell his stake for five years. The combined entity would be "the undisputed world leader in all product segments including flat carbon steel, long carbon steel and distribution", Arcelor said.

It would be particularly strong in the automotive steel segment with a global market share of more than 20 percent - more than double its nearest competitor. The companies noted they knew each other well from Russian joint ventures.

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