Don Pether guided Dofasco through a period of turmoil in the steel business. ((Nathan Denette/AP))

Russia's biggest steel company became a chip in theconsolidation of the international steel business on Friday.

Arcelor SAof Luxembourg said it has struck a merger deal with Severstal of Russia to create "the world’s steel champion and most profitable steel company."

The transaction also will complicate the unwelcome $33-billion US takeover bid that the Dutch company Mittal Steel made for Arcelor. Suddenly, Mittal is faced with buying a much larger and different target, assumingArcelor shareholders approve the Severstal merger.

The deal has also further confused the future ownership of Dofasco, Canada'smost respected steel maker. Arcelor bought the Hamilton-based company earlier this year, but Mittal has promised to sell it to ThyssenKrupp of Germany — if it wins control of Arcelor.

Mittal angry

Mittal reacted angrily to the Arcelor/Severstal deal, calling it a "second-class combination."

Arcelorshareholders will get a chance to vote on the merger in June, but Mittal said they really have no choice."Arcelor's shareholders are being forced to hand over control of their company, whilst being denied a premium," Mittal complained.

The merger involves an exchange of assets and cash between Arcelor and Severstal's controlling shareholder, Alexei Mordashov. Under the deal:

  • Mordashov will give his stake in Severstal and Italian steel maker Lucchini SpA to Arcelor.
  • Mordashov will give Arcelor €1.45 billion ($2 billion Canadian).
  • Arcelor will issue Mordashov new stock that will give him 32 per cent of the merged company.

Arcelor said thenew stock will be issued to Mordashov at a value of €44 a share. Mittal's offer is worth €34.74 a share, Mittal said recently.

Dofasco's Pether retires

As the giants of the steel industry announced multi-billion-dollar transactions, the takeover of Dofasco by Arcelor inched ahead.

On Friday, Dofasco said president and CEO Don Petherwill leave on July 21, to be replaced by Arcelor's Jacques Chabanier.

Pether, who started with Dofasco in1970, has worked asa metallurgist, sales manager,
vice president and general manager of the Hamilton business before becoming CEO in 2003.

Chabanier began in 1972 as the operation engineer at the Dunkirk, France, plant of Usinor, one of the mother companies of Arcelor. Hebecame general manager and then moved on tosenior executive jobs in Usinor and Arcelor.

Pether will replace Dofasco's chairman Brian MacNeill on July 21.