Arcelor, Severstal announce tie-up

The European steelmaker is merging with the Russian firm in order to thwart Mittal's takeover bid.

india Updated: May 31, 2006 11:58 IST

European steelmaker Arcelor announced on Friday it was merging with Russian company Severstal, in an operation aimed at thwarting a takeover bid by rival Mittal Steel.

The merger, due to be finalised at the end of July, will create the world's biggest steelmaker with turnover of $59 billion dollars, Arcelor said in a statement.

Severstal's president and owner, Alexey Mordashov, "will contribute all of his economic interests in Severstals steel business" as well as Severstal-Resource, which holds iron ore and coal assets, and his stake in Italian steelmaker Lucchini, it said.

In addition, he will contribute 1.25 billion euros in cash to Arcelor.

In return, Mordashov will receive about 32 per cent of the new merged group and the position of non-executive president of the Arcelor board of directors where chairman Guy Dolle will remain.

Mittal, the world's largest steelmaker, had voiced concerns late on Thursday about attempts by Arcelor to ally itself with the Russian company.

Mittal has offered 25.8 billion euros ($32.9 billion) or 37.74 euros per Arcelor share to buy the company.

Arcelor and Severstal set up a joint venture in 2002 and opened a plant in Russia in April.

For several weeks the media has speculated that Arcelor was seeking a 'white knight' to head off Mittal's bid, which the Arcelor management has rejected.

First Published: May 26, 2006 10:57 IST