25th Mar 2008 07:00
OAO Severstal21 March 2008 FOR IMMEDIATE RELEASE Severstal Reaches Agreement to Acquire Sparrows Point MOSCOW, Russia - March 21, 2008: OAO Severstal (LSE: SVST; RTS: CHMF), one ofthe world's leading metals and mining companies, today announced that it hasreached an agreement to purchase Sparrows Point, a fully-integrated steel millbased in Baltimore, Maryland, United States. Sparrows Point, currently owned by ArcelorMittal, is being sold by Joseph G.Krauss, Divestiture Trustee, as required by the Final Judgment entered on May23, 2007 in the United States District Court for the District of Columbia (the"District Court") in the matter known as United States v. Mittal Steel CompanyN.V., to settle a complaint filed by the United States Department of Justicefollowing the merger agreement between Mittal Steel and Arcelor SA in 2006. Severstal has agreed to acquire Sparrows Point LLC for an all cash purchaseprice of US$810 million. The transaction reflects a significant strategicopportunity to add complementary assets and scale to Severstal's existing U.S.business. Sparrows Point has a capacity of 3.6 million metric tons of crude steel andshipped 2.3 million metric tons of finished steel products in 2007; it is theonly integrated producer of flat rolled steel on the U.S. East Coast and is amajor North American supplier of tin mill products. Severstal expects to realize significant business improvements and synergies atSparrows Point in conjunction with a five-year investment program at the plant.The transaction is expected to be accretive in year one based on currentprojections of costs and prices and offers value creation potential.Additionally, the Company expects substantial synergies with its current U.S.operations in Dearborn, Michigan and Columbus, Mississippi. With the addition ofSparrows Point, Severstal will also improve its distribution channels andincrease its geographic reach as the plant provides direct ocean access andproximity to a number of major U.S. railways and highways. Alexei Mordashov, CEO of Severstal, commented, "With Sparrows Point, Severstalbrings into its U.S. portfolio an asset with significant existing value as wellas unlocked growth potential. This acquisition presents us with an opportunityto enhance productivity at Sparrows Point through our high standards ofoperational performance and will benefit our existing U.S. businesses. We expectto realize synergies in Sparrows Point and with SNA that will fuel increasedproduction and profitability. We remain committed to growth in North America andbelieve in the long-term promise of the U.S. market; we're confident that thisacquisition will create value for our shareholders while strengthening our U.S.platform as a whole." Severstal and the United Steel Workers have agreed to enter into a collectivebargaining agreement, reinforcing the Company's already strong relationship withorganized labor. The acquisition is subject to customary closing conditions, including approvalby the United States Department of Justice, and is expected to close in 2Q08. Merrill Lynch & Co. is acting as exclusive financial advisor to Severstal andrendered a fairness opinion to the Board of Directors regarding thistransaction. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counselto Severstal. About SeverStal: OAO SeverStal is an international steel producer with a listing on the RussianTrading System and the London Stock Exchange. Incorporated in 1993, the companyfocuses on high value added and unique niche products and has a successful trackrecord of acquiring and integrating high-quality assets in North America andEurope. SeverStal owns mining assets in Russia, thus securing its supplies ofraw materials. In 2007, Severstal produced 17.5 million tons of steel. Revenueswere $15.2 billion and EBITDA was $3.7 billion. EPS was $1.92. Forward Looking Statements: This communication may contain projections and other forward-looking statementsregarding future events or the future financial performance of OAO Severstal(Severstal). Forward looking statements are identified by terms such as"expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may"or "might", the negative of such terms, or other similar expressions. Severstalwishes to caution you that these statements are only predictions and that actualevents or results may differ materially. Severstal does not intend to updatethese statements to reflect events and circumstances occurring after the datehereof or to reflect the occurrence of unanticipated events. Factors that couldcause the actual results to differ materially from those contained inprojections or forward-looking statements of Severstal may include, amongothers, general economic conditions in the markets in which Severstal operates,the competitive environment in, and risks associated with operating in, suchmarkets, market change in the steel and mining industries, as well as many otherrisks affecting Severstal and its operations. For further information: SeverStal Dmitry Druzhinin, Investor Relations Olga Antonova, Public Relations +7 495 540 7766 Taylor Rafferty Michael Henson +1 212 889 4350 (o) +1 917 902 0767 (m) John Dudzinsky +1 212 889 4350 (o) +1 646 715 2980 (m) Information regarding a conference call for analysts and investors will beforthcoming. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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