Arcelor extends control over Brazil's CST

Arcelor extended its control over Brazilian steel maker CST on Friday in a deal with minority shareholders which paves the way for a unification of its disparate Brazilian holdings.

Arcelor, the world's biggest steel producer, said earlier this year it wanted to consolidate all its Brazilian businesses in one operating unit, which might then be listed on the Sao Paulo stock exchange.

When Arcelor acquired Companhia Siderurgica de Tubarao (CST) in June, it was the Luxembourg-based company's first big transaction since its creation in 2002 through a three-way merger that burdened it with heavy debts.

Arcelor paid CST's main shareholder, Companhia Vale do Rio Doce (CVRD) Friday's agreement with California Steel Industries Inc. (CSI) from the United States, Japan's JFE Steel Corp. and other Japanese minority shareholders allows Arcelor to take over CVRD's stake more quickly as well as giving it options on the minority holdings, an Arcelor spokesman said.

The company had forecast its increased stake in the low-cost carbon steel producer would significantly boost revenue and profit margins, and now has the option to consolidate earnings from CST from the fourth quarter of 2004, a spokesman said.

Arcelor had initially expected the deal to be completed during the second half of 2005.

MINORITY BUY-OUT OPTION

"CSI, JFE and the other Japanese shareholders waived their rights of first refusal under the CST Shareholders Agreement as from October 14th, 2004," Arcelor said in a statement.

That means Arcelor can now go ahead and buy the rest of the stake it agreed to purchase without having to wait for the expiry of the shareholders' agreement in spring next year.

JFE and the other Japanese shareholders own 7.9 percent of CST, while CSI has 1.5 percent, the spokesman said.

After this deal, Arcelor will hold 70-71 percent of CST, the spokesman added. "I can't give a price, but it's similar to what (CST was valued at) in the agreement with CVRD (on a per share basis)," the Arcelor spokesman said.Arcelor currently controls 48.1 percent of CST, he added.

CST has nearly 20 percent of the global market for finished carbon steel slabs. It produced 4.8 million tonnes in 2003, of which it exported more than 90 percent.

Arcelor controls two other Brazilian steel makers -- Belgo Mineira and Vega do Sul, and also owns 27.68 percent of Acesita.

(From Reuters, October 15, 2004)

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