"Severstal" saves Arcelor

Lakshmi Mittal has a week to disrupt the deal to unite companies by the end of the past week marked by the proclamation of a very large transaction for Russia (Mergers & Acquisitions), the total amount of which can reach $ 13 billion. The Luxembourg company Arcelor is going to unite with the Russian Severstal, as a result of which the largest steel company with a production volume of about 70 million tons per year may appear on the world market. However, this unique fact is Arcelor's feat of a deal. Its main driving force was the desire to avoid unfriendly absorption, as a result of which Arcelor would cease to exist as an independent company.

Recall that a few days ago, Lakshmi Mittal, the owner of the steel company Mittal Steel, announced his intention to acquire Arcelor for 26 billion euros. Buying Severstal, Arcelor is 90% insured by absorption by the company Lakshmi Mittal.

The only problem is in one thing: to finally argue that the transaction with Severstal will definitely take place, so far it is impossible - there is no consent of Arcelor owners. The meeting of shareholders of the Luxembourg company will be held in early June, and then the intrigue will be allowed. So far, most analysts say that in the interests of shareholders to approve the deal - the rejection of it would actually mean surrender and consent to join Mittal Steel. In addition, Severstal is already a proven partner for Arcelor and offers good terms of the transaction. However, theoretically in a week, the mood of shareholders can change, and in the circumstances this is the only thing that Lakshmi Mittalu has to count on.

For the remaining few days, his company may try to kill the conditions proposed by Severstal, or try to convince the shareholders that the transaction with the Russian enterprise is unprofitable.

As for Severstal, its chairman of the board of directors Alexei Mordashov is confident in the advisability of the transaction. It is planned that Mordashov will belong to 32% of the united company, and in the future he intends to bring his shares package to 45%. In the meantime, for 32%of the shares, Alexei Mordashov will pay 1 billion 250 million euros, which he intends to attract in the form of a loan, and he will transfer Arcelor all the Severstali assets (89.6%) and the Italian steel company Lucchini (50%). For its part, Arcelor will conduct a domain of shares in the amount of 46% of the authorized capital before the confluence and as a result will receive 68% of the united company.

The Russian authorities have positively accepted the upcoming transaction. In their opinion, the precedent with Severstal is a positive example of integration. At the same time, the company of Alexei Mordashov, in his own conviction, in any case will remain Russian and will be quoted in the Russian stock market. The operational management of Severstal assets will continue to be implemented by Russian managers. In addition, 25% of the shares of the Cherepovets enterprise will remain under their control.

The Federal Antimonopoly Service does not see threats for competition in the Russian market in the upcoming merger. According to its representatives, of course, a stronger player will appear on the market, but the rest will remain and will have a chance to fight him on an equal footing.

05/28/2006 / Evlalia Samedova, the material was published in the newspaper No. 89 dated 05.29.2006.