European steel merger approved

European Commission regulators have given the go-ahead for the combination of Usinor (France), Arbed (Luxembourg), and Aceralia (Spain) to form the world’s largest steel maker, which would topple Nippon (Japan) from the number one spot. But the potential partners have to complete the haggling over the details of their USD 3 billion deal. Aceralia and shareholder Arbed are looking for a combined 48% of the planned company, which would up the 43.5% originally offered. Under the Commission’s ruling they also have to sell off assets to allay concerns that the grouping would dominate the galvanised steel market in France, Spain and Portugal. The commission points to the sale of 1.7 million tons of galvanised product to release the deal. They will also have to sell Cofrafer, which is in steel service centres in Spain, Portugal and France to enhance prospects of healthy competition. If the requirements are met and the deal done, the new group will represent production capacity of 46 million tons per year and projects costs savings as a combination of USD 650 million per year and capital savings of USD 325 million per year, which is crucial in the over supplied, highly competitive world market.
Rationalization and consolidation of production resources on a regional and international basis will continue. Talks are taking place amongst embattled US producers and world deals seem to be the way to face world oversupply and localised cost pressures.

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