(AFX) - Arcelor SA and Mittal Steel Co. can both claim to be the world's biggest steelmaker -- Arcelor makes more money but Mittal ships more steel. If Arcelor merges with Russia's OAO Severstal or is taken over by Mittal, that argument will end because the new company will be the undisputed biggest.
The outcomes:
-- Mittal and Arcelor: Merging the two top steelmakers would create a company with nearly a 10 percent share of global production, employing more than 320,000 people. In 2005, they had combined revenues of euro55 billion (US$70.1 billion) and produced 116 million tons of crude steel.
Mittal is currently offering euro37.74 (US$48.19) a share for Arcelor in a cash-and-stock bid valuing the company at euro25.8 billion (US$33 billion). It needs to win over at least 50 percent of Arcelor shareholders for its bid to succeed. The offer represents a premium of 70 percent on Arcelor's share price on Jan. 26, the day before Mittal made its first move.
Since its first surprise offer in January, Mittal has backed off a demand for the Mittal family to take a controlling share of the new firm, saying it would be content with a minority 45 percent of both share capital and voting rights. The family currently control 88 percent of Mittal.
--Severstal and Arcelor: The company will have a 6 percent share of world steel output and more than 196,000 employees. Based on their 2005 results, together they had euro40.6 billion (US$51.79 billion) in sales and produced more than 70 million tons of crude steel.
Severstal says this will be a smaller and leaner combination than the Arcelor-Mittal behemoth. It will contribute access to raw materials in Russia and India that would help keep costs low. Severstal says the two companies combined last year made euro662 (US$827.63) per ton and had earnings before interest, tax, depreciation and amortization, or EBITDA, euro130 (US$162.53) per ton. By comparison, it says, Arcelor-Mittal made euro566 (US$707.61) per ton, and EBITDA of euro104 (US$130.02) per ton.
Severstal will pay euro44 (US$56.12) per share but this is not directly comparable to Mittal's bid because its 25 percent stake will come from newly issued shares. Severstal's controlling shareholder Alexei Mordashov will hand over his stake in all of Severstal's steel assets in Russia and North America as well as his shares in Italian steelmaker Lucchini SpA.
Severstal says this is worth US$9.2 billion (euro7.36 billion). At a 100 percent premium on the Jan. 26 share price, Arcelor claims the offer values it at euro40 billion (US$51 billion) -- close to four times its market capitalization at the end of last year.
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