Arcelor snubs Mittal; to merge with Russian company Severstal

Rex Mathew
26 May 2006

The deal has been concluded at a significant premium to Arcelor's closing price of €34 yesterday. Mittal's revised bid for Arcelor was at €35.62, in cash and equity shares of Mittal Steel.

Arcelor said it would go ahead with the merger if at least 50 per cent of the shareholders approve it. It expects the deal to be concluded as early as July this year.

Arcelor said it is targeting normalised EBITDA of €10 billion per annum for the merged entity. It expects to save €590 million through synergies with Severstal, which could go up from capital expenditure.

Severstal is controlled by Russian billionaire Alexey A Mordashov, who is worth over $7 billion according to Forbes. Mordashov would invest an additional €1.25 billion in the merged entity, taking his stake in the merged entity to 32 per cent. The balance would be held by existing shareholders of Arcelor.

Mordashow would become non-executive president of the combined entity and would have the right to nominate up to 8 members to the Arcelor-Severstal board.

The combined entity would overtake Mittal Steel as the largest steel producer in the world in volume terms. Arcelor-Severstal combine would have total steel output of over 70 million tonnes per annum, almost 10 million tonnes higher than Mittal Steel. The merger would strengthen the presence of Arcelor in Russia and Italy besides giving it a wider foothold in the US.