Arcelor-Severstal may buy more steel assets
Arcelor and Severstal will consider more acquisitions after uniting to become the supplier of one-fifth of the steel used in the auto industry worldwide.india Updated: May 28, 2006 08:43 IST
Arcelor and Severstal will consider more acquisitions after uniting to become the supplier of one-fifth of the steel used in the auto industry worldwide, senior company executives said on Saturday.
Russia's biggest cross-border deal will create the world's largest and most profitable steel maker, and if approved would probably thwart a hostile takeover offer for Arcelor by larger rival Mittal Steel.
"We have the legal and technical means to carry out further mergers and takeovers. This could mean buying companies or merging with companies, if it's in the interest of shareholders," Severstal owner Alexei Mordashov said.
"We are creating a strong, effective company capable of giving value to its shareholders everywhere in the world. Of course we have real plans to grow," Mordashov said.
Arcelor unveiled on Friday plans to buy Severstal in a deal giving 40-year-old Mordashov almost a third of the European steel giant's shares.
Interfax news agency quoted Mordashov as saying he wanted to increase his stake to 45 per cent, but regulatory authorities and the interests of other shareholders precluded him from doing so.
Both companies said in a presentation they were targeting 10 billion euros ($12.76 billion) in earnings before interest, tax, depreciation and amortisation.
Asked whether Severstal and Arcelor would pursue acquisitions in Russia, Mordashov said: "We would be glad to participate wherever we see attractive possibilities. If such opportunities are in Russia, we'd gladly grow in Russia".
Mordashov, who said the deal values Severstal at about 13 billion euros -- a hefty premium to its market valuation -- has agreed to contribute his 90 per cent stake to Arcelor as well as his 51 per cent stake in Italy's Lucchini SpA and 1.25 billion euros in cash.
In return, he will receive Arcelor shares at a price of 44 euros per share, representing a 32.2 per cent stake in the firm.
Arcelor CEO Guy Dolle said the new company would supply 22 per cent of the steel used by the world car industry.
Nippon Steel, with 9 per cent, would be its nearest competitor in this market, the companies said in a presentation. Mittal Steel would have an 8 per cent market share.
Dolle said Arcelor's shares traded on four exchanges worldwide. He said this would give plenty of opportunity for interested parties to buy shares in the company.
Dolle added the company's global presence would make it particularly strong in the so-called BRIC countries: Brazil, Russia, India and China.
About 40 per cent of the enlarged group's core earnings would be in the lucrative Brazilian and Russian markets.
Arcelor, the world's second-largest steel maker by volume, and Severstal -- ranked No 13 worldwide by the International Iron and Steel Institute -- together produced 70 million tonnes of steel last year, the companies said in the presentation.
They said this was more than Mittal Steel's 63 million tonnes.
Dolle said the deal could spark more cooperation between Russian and western steel companies.
"The links between Russia and Europe are very strong from an economic point of view, and there is no political problem," he said on the sidelines of the press conference.
Mordashov said the deal with Arcelor would not affect Severstal's status as a Russian company.
"It will remain a Russian company and it will pay its taxes in Russia," he said.
"This takes Russian business to an international level. It's very important to protect the interests of Russia, Russian citizens and stakeholders."
First Published: May 28, 2006 08:43 IST