Steel appeal

By THIS IS MONEY
Updated:

 

British Steel is in merger talks with a Dutch steel and aluminium giant.

The company's shares rocketed - closing up 28 points to 161 ¾ a rise of 21%. But there was not the same enthusiasm for Koninklijke Hoogovens whose shares on the Amsterdam stock exchange notched up a 0.53% rise to close at e37.7

The enthusiastic reception given to the deal in London reflects the company's statement that any deal with Koninklijke Hoogovens would be accompanied by "a return of value" to its shareholders. The suggestion is that the privatized steel maker will offer some kind of extra dividend to its shareholders, many of who are the Sids who bought Steel shares when it was floated by the Thatcher Government in the 1980s.

British Steel said a fuller statement would be released no later than next Monday.

The company's shares have been rising solidly since weekend reports claimed that it was in talks with a number of parties, one of which was said to be Hoogovens.

Analysts have been expecting some sort of partnership or takeover for a while as British Steel's profits have been hampered by the Asian economic crisis, the strong pound and severe pricing pressures.

A British Steel-Hoogovens tie-up would create a giant in the steel industry.

British Steel is already the world's fourth largest steel producer, employing 50,000 staff worldwide, while Hoogovens is one of Europe's biggest, with 22,000 employees.

British Steel is undergoing a major cost-cutting programme which is expected to see between 12,000 and 14,000 job losses by 2001.

The combined company would have a turnover of around £10.86 billion.

At current stock market prices the company would have a combined market capitalisation of £3.59 billion. British Steel's shares are worth £2.65 billion, while Hoogovens is valued at £937.5 million.

Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union said: "Clearly, we are waiting for a fuller statement by next Monday.

"We will be having urgent discussions with British Steel to safeguard employment security for our members in the event of a merger."

Most watched Money videos