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Monday, June 7, 1999 Published at 16:14 GMT 17:14 UK

Business: The Company File

British Steel merges with Dutch rival

British Steel has announced that it will merge with its Dutch rival Koninklijke Hoogovens, creating the world's third largest steel producer.

Chief Executive of British Steel John Bryant: "We are now very much a European steel company"
The combined company, to be called BSKH, will have a market capitalisation of £2.9bn ($4.7bn) and notch up sales worth £9.4bn ($15.1bn).

The new group plans to make £194m savings per year, expecting "terrific cost savings in overhead costs, purchase, logistics and adjusted best practices".

British Steel has already confirmed that some jobs will go in administration, but has declined to specify how many people will be axed.

[ image: The British Steel name is unlikely to survive a merger]
The British Steel name is unlikely to survive a merger
While workers may be nervous, British Steel shareholders can look forward to receiving 35p ($0.56) a share as a result of the deal - a total pay-out of £694m ($1.12bn).

The newly merged company will provisionally be called BSKH and will be Europe's biggest steel company. British Steel will represent 61.7% and Hoogovens 38.3% of the new group.

Miles Fletcher reports from south Wales where British steel has two of its biggest plants
Its headquarter will be in London, and its shares will be listed on the London, Amsterdam and New York Stock Exchanges.

BSKH will have 70,000 employees, 50,000 from British Steel.

British Steel is currently in the process of cutting some 10,000 jobs on the shop floor, but most analysts believe that likely job losses will come on management level, to weed out duplicated positions.

British Steel is to meet unions on Tuesday to discuss the merger.

Productivity gains

Union officials are especially concerned about the future of plants in Port Talbot and Llanwern in South Wales, and Shotton in North East Wales.

Michael Leahy, Iron and Steel Trade confederation: "There won't necessarily be any job losses"
Michael Leahy, general secretary of the main steel union, the Iron and Steel Trades Confederation, said: "British Steel is already a fit and lean company and is one of the most productive and profitable in the world."

Mr Leahy said the Dutch firm had been going through its own productivity programme and together with British Steel was competitive enough to "take on the world".

"Speculation that a UK plant could be closed is just ill-informed speculation," he added.

[ image: Large scale job losses are already in the pipeline]
Large scale job losses are already in the pipeline
Amalgamated Engineering and Electrical Union general secretary Ken Jackson said: "A merger could bring huge benefits, creating one of the world's most powerful steel companies but it may also pose a serious threat to employment security.

"We will discuss with British Steel how that can be avoided and we will also be contacting trade unions in Holland to talk about the possibility of forming a partnership."

Share price boost

London FTSE 100
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The link-up has been welcomed by markets in London and Holland. Last week, when first reports of the deal emerged, British Steel shares rose more than 20%.

During early trading on Monday, the company's shares shot up another 8.1% or 13.25 pence to 175 pence.

However, later in the day the stocks traded down again, losing 11.5 pence or 7.1% on Friday's close.

Traders said investors may be switching some holdings out of British Steel into Hoogovens to benefit from of an expected premium in Hoogovens' share price.

British Steel has recently been badly hit by the strength of the pound. Industry analysts welcomed the deal as a way of it getting a wider foothold in the European market.

In global terms there are only two steel producers that are bigger: Posco of South Korea and Japan's Nippon Steel.

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