Severstal Splits in 3, Eyes M&A Targets

Severstal, the country's largest steel maker, is splitting its business into three divisions and considering further acquisitions in North America, Europe and Africa, senior company executives said on Monday. Severstal, majority owned by billionaire Alexei Mordashov, will create three separate divisions from this month to focus on its Russian steel operations, its international companies and its raw material assets, mainly coal, iron ore and gold.

"The simplified, more focused structure will serve to improve our competitiveness, increase production, cut costs and maximize profit," said Mordashov, Severstal's chief executive who is ranked the world's 18th-richest man by Forbes magazine. Severstal, with a market capitalization of $24.7 billion, operates Russia's second-largest steel plant, while its expansion into North America has moved the company into the top five U.S. steelmakers by capacity.

It also owns steel assets in Italy.

Gregory Mason, who will head the Severstal International division incorporating the North American assets and Lucchini in Italy, told a news conference further expansion was possible.

"For now, we are growing in all the regions where we are already present," Mason said, adding he did not rule out mergers and acquisitions elsewhere. "In the American market, there are of course more opportunities for mergers," he said.

Severstal owns the former Rouge Steel plant in Dearborn, Michigan, jointly owns the SeverCorr venture in Columbus, Mississippi and has agreed to acquire the Sparrows Point mill in Baltimore, Maryland for $810 million.

Roman Deniskin will remain chief executive of Severstal Resources, the division controlling the company's iron ore, gold and coal mines and exploration projects.

Deniskin said the company was looking at resource assets in Kazakhstan following its acquisition this year of Celtic Resources, which operates the Suzdal and Zherek gold mines in the country.

"Abroad, we are continuing to study Kazakhstan and, for iron ore, Africa. West Africa will be our number one priority," Deniskin said.

He added that the company planned to start producing gold within three to four years at one or more of the deposits it has acquired in Siberia since embarking on a plan to become one of Russia's leading gold miners.

Anatoly Kruchinin, chief executive of the Cherepovets Steel Mill, has been appointed CEO of Severstal Russian Steel, which will also incorporate the company's pipe, wire and scrap-metal assets.

As well as expanding its Cherepovets plant, Severstal is building mini-mills elsewhere in Russia to serve booming demand from the country's construction sector. The company plans to invest a total of $6 billion in Russia by 2011.