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Severstal hopes for merger with big industry partner - CEO - 1

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MOSCOW, September 14 (RIA Novosti) - Severstal [RTS: CHMF] hopes for a merger with a big partner in the industry, the board chairman of Russia's number one steelmaker said Thursday.

A planned merger between Severstal and the world's No.2 steelmaker Arcelor, inked May 26, fell through after it was rejected by Arcelor shareholders June 30 to clear the way for a takeover of the Luxembourg-based company by the world's largest steel company Mittal Steel. Arcelor paid Severstal 140 million euros (about $180 mln) in compensation.

Alexei Mordashov said his company plans a future merger with a big partner [in the industry], but only if it is beneficial for shareholders.

"I have nothing against my share being diluted [after the merger], but the main thing is to create company value for shareholders as a result of such a merger," Mordashov said.

He said Severstal would continue efforts to consolidate the industry despite opinions that such consolidation could negatively affect the industry.

"We need consolidation, it is a sound and useful process for the industry," Mordashov said. However, he failed to name a company with which Severstal planned to hold or was holding talks on such a merger.

Severstal said in August its revenues calculated to Russian Accounting Standards fell 27.4% in the first six months of 2006 year-on-year, to 72 billion rubles ($2.7 bln). The company's gross profit fell 24.5% in the reporting period, to 22.1 bln rubles ($810 mln) and pre-tax profit declined 25.5%, to 18.6 bln rubles ($688 mln).

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