If the controversial merger between Arcelor of Luxembourg and Severstal of Russia is approved, the steel industry will have a new undisputed czar in the shape of Alexei Mordashov, Severstal's chairman, who could take a stake of up to 38 per cent in the new company.
Speaking at Severstal's main plant in Cherepovets, 600km north of Moscow, Mr Mordashov complained of "a lot of prejudice"about the proposed deal, particularly from some investors in Arcelor who have said the transaction lacks transparency and will give an undue amount of control to the 40-year-old steel magnate.
A combined Arcelor-Severstal would be the world's biggest steel company, taking over from Lakshmi Mittal's Mittal Steel. The Indian steel billionaire is fighting his own battle to take over Arcelor, for which he has tabled a €25.8 billion offer that the Luxembourg company has fiercely rejected.
Mr Mordashov - a former economist who owns 90 per cent of Severstal - said he was convinced a merger with Arcelor would be in the best interests of both companies and create a "global steel champion". A merged business would have an expected market capitalisation of some € 46 billion and be strong in two important emerging economies - Russia and Brazil - as well as western Europe and the US.
Some Arcelor investors are concerned that Mr Mordashov will have a right of veto over the commercial policies of the Russian operations of a combined group, and will have powers to push through decisions for the whole company via his control of a new strategy committee.
They have voiced fears that the deal will be nodded through after only cursory scrutiny. Arcelor shareholders are due to vote on the deal on June 30th, but on the basis that it will go through, unless more than 50 per cent of the entire voter base voices disapproval.
"Mr Mordashov will be pulling all the strings [in a combined business]," said one US-based shareholder.
"It's a ridiculous situation for Arcelor to be in, especially for a company that has prided itself for high standards of corporate governance."
Mr Mittal has also weighed into the battle, arguing that its proposed deal with Arcelor would create a better - and much bigger - company and that the only reason the Luxembourg steelmaker has espoused the Russian company is to stop the Mittal/Arcelor merger going ahead.
A banker who knows all three steel companies well and has no commercial ties with any of them is more positive about Severstal.
"They are a company with a very good cost base, high standards of efficiency and a tremendous amount of potential.
"The Russian steel industry has a big part to play in the world steel sector and so Severstal linking up with Arcelor in this way could turn out very exciting."
Proof that Severstal has taken an international outlook for some time came with the disclosure that the Russian company had, three years ago, talked about a potential merger with the US's International Steel Group. The Ohio-based business ultimately decided against a link with Severstal, instead opting for combining with Mr Mittal's steel interests in a $21 billion deal announced in late 2004.
Wilbur Ross, a US financier who is ISG's former chairman and is now a senior non-executive director at Mittal Steel, said he thought Severstal was "quite a decent company", although he judged, at the time of the partnership discussions, that a link with it was not in ISG's best interests. The lack of progress with ISG did not put Severstal off the idea of pursuing a US deal.
Just over two years ago it bought Detroit-based steelmaker Rouge Industries for $285 million (€225 million).
