Thursday, June 29, 2006
Where now for Severstal?
Readers could be forgiven for confusion over the intentions of Severstal, following Mittal’s increased offer for Arcelor. Reading various reports from around the internet this morning reveals conflicting rumours regarding their next move.
Firstly, the Arcelor shareholders’ still have the opportunity to reverse the board’s recommendations on the Mittal deal, although that is unlikely, as the deal was viewed by many as a manoeuvre designed to “scupper” the Mittal offer. It is also possible that Alexei Mordashov could put forward an improved offer, which would make the deal very expensive and possibly difficult to finance. Alternatively he could walk away and collect a euro140 million “break-up fee”.
Amongst the hype that has accompanied this affair, have been accusations of an anti Russian sentiment within Europe, which has to be balanced against previous accusations of an anti Asian bias, which has been levelled during the course of negotiations with Mittal. However I think it unlikely that Severstal and Mr. Mordashov will abandon their ambitions of expansion and we could expect to see more activity in the takeover/merger field within the global steel industry over the coming weeks. There is no doubt that Russia with it’s wealth of raw materials and low labour costs is going to play an important part in the future of steel manufacturing and speculation will continue as to which companies will become the next target.