Arcelor, the world’s No. 1 steel company, and Severstal, the largest Russian steel company, announced May 26 that they have agreed to merge, creating the world’s steel champion and most profitable steel company. The combined company will rank among the world's most competitive steelmaking and resource assets in both developed and emerging markets, and will be the only one with leading positions in Brazil and Russia.
The transaction values Arcelor at EUR44 per share, excluding EUR 1.85 dividend, representing a premium of 100 percent over Arcelor’s closing price on January 26, 2006, the day before Mittal Steel announced its hostile offer, and 36.6 percent over Arcelor’s closing price ex-dividend on May 25.
In addition, up to EUR7.6 billion cash will be returned to shareholders, including via dividends and OPRA (self tender).
The combination of Arcelor and Severstal will be the top steel company in the world with EUR 46 billion in sales, EUR 9 billion in EBITDA and 70 million tonnes of production, based on each company’s pro forma 2005 results.
Under the definitive agreements signed by the parties, Alexey A. Mordashov, Severstal’s controlling shareholder, will contribute all of his economic interests in Severstal’s steel business (including Severstal North America), as well as Severstal-Resource (iron ore and coal assets) and his ownership interest in Italian steelmaker Lucchini, to Arcelor.
Mordashov will also contribute a cash payment of EUR1.25 billion to Arcelor in exchange for shares at a price of EUR44 per share.
In total, Mordashov will receive 295 million newly issued Arcelor shares at a price of EUR44 per share, representing approximately 32 percent of the enlarged Arcelor.
Arcelor’s existing shareholders will retain approximately 68 percent of the enlarged Arcelor.
The combined entity will consolidate Arcelor’s technology leadership and experience and will be the undisputed world leader in all product segments including flat carbon steel, long carbon steel and distribution. The combination will strengthen Arcelor’s No. 1 global position in the automotive steel segment (with top positions worldwide with a global market share over 20 percent - more than double that of its nearest competitor).
