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Benefits promised from British Steel/Dutch merger

NEWS

THE £4bn merger between British Steel and Dutch steel-maker Koninklijke Hoogovens is expected to result in a broader product range and greater involvement with customers at the design stage of a project.

On Monday the two boards announced that they had agreed in principle to propose a merger to shareholders. The word British will disappear from the merged group's name, provisionally BSKH.

Hoogovens is noted for its state-of-the-art aluminium operation. Both companies said the move was designed to meet customer demand for a wider range of tailored products, as well as closer working relationships using the latest technology.

The move is expected to deliver cost savings in central purchasing and logistics of £194M per annum by the third full year of trading. About 2,000 job losses are expected in areas of overlap between the two companies, although no British plants are expected to close.

The combined turnover of the two companies in the last financial year was about £9.4bn and the enlarged group will have a combined market capitalisation of just less than £3bn.

British Steel shareholders will hold about 61.7% of the issued ordinary share capital of the enlarged group and will receive a cash payment of 35p per share on completion. Hoogovens' ordinary shareholders will hold the remaining 38.3 %.

The merger announcement was accompanied by British Steel's preliminary results for the 53 weeks to 3 April. The company made a pre-tax loss of £142M, compared to a £315M profit for the full year to 28 March 1998.

It blamed the the strength of Sterling and the Far East economic crisis.

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