USINOR, ARBED and ACERALIA decide to merge to form World's largest steel group. The French steel group USINOR, Luxembourg ARBED and Spanish ACERALIA announced, on 19 February in Brussels, their intention to merge all their activities. The project, that will soon be notified to the European Commission services responsible for monitoring competition conditions, will take concrete shape after a public offer for a share swap involving the three partners. The merger will make the new group, provisionally called NewCo, the world leader in the steel sector. The seat of NewCo, which should be set up this autumn, will be established in Luxembourg. The new group will be co-chaired by Joseph Kinsch and Francis Mer, Chairman of the ARBED managing board and CEO of USINOR. The parities for exchange have been fixed at 8 shares of the new venture for 7 ACERALIA shares, 10 shares for one ARBED share and one-for-one USINOR shares. Other than cross participation and independent control shares, the current USINOR shareholders will hold 56.6% of the NewCo capital, while ARBED shareholders will hold 23.4% and ACERALIA shareholders 20.1%. The new company will be quoted on the Paris and Brussels exchanges (Euronext) as well as in Luxembourg and in Madrid. Using the rate on 15 February 2001 as a reference rate, its stock exchange capitalisation would be greater than EUR 5 billion. ACERALIA, ARBED and USINOR based their agreement on an industrial project based on four sectors of activity: flat carbon steels, long carbon steels, stainless steels, distribution, trading and transformation. The project allows for a large number of synergies in the fields of production, distribution, purchasing and management. They will be implemented as soon as NewCo is effectively established and should allow costs to be cut by around EUR 300 million from 2003. Those responsible for the project hope the annual cost reductions will be gradually increased to EUR 700 million in the run up to 2007. The alliance between the three steel companies will allow them, moreover, to save nearly EUR 350 million in investment over the next four years (2002-2005). According to the estimations based on data from the three partners for the year 2000, the new group will employ over 110,000 throughout the world and will produce 46 million tonnes of liquid steel. It will be in leading position for flat carbon steels with a turnover of EUR 15 billion, for long carbon steels with a turnover of EUR 4 billion, for stainless steels with a turnover of EUR 5 billion, for distribution, trading and transformation with a turnover of EUR 6 billion, that is, in total, a consolidated turnover of nearly EUR 30 billion. The ambition of the three companies is to give the necessary impetus to consolidating and improving the performance of an industry whose markets, for the large part, are now global. They have therefore decided to pool their activities in order to gain strength in Europe and to avail themselves of the means to grow outside the Old Continent. With this in mind, the strategic agreement signed between NIPPON STEEL and USINOR on 23 January 2001 will be extended to the new group. NewCo should be created this autumn, once the project has received the endorsement of the European Commission's competition services. The merger project will be notified to these services between 5 and 15 March. Its promoters consider that it will probably take the Commission several months to give its opinion and to admit that some changes could be required, mainly concerning the distribution and certain tools for enhancing flat products. ACERALIA, ARBED and USINOR decision-makers consider their move as a significant contribution to the economic construction of Europe. They hope to adopt the statute of European Company as soon as possible.