POSCO denies consolidation talks with Arcelor Mittal

16 Mar 2007

The world's third-largest steel maker, Korea's POSCO, has denied a Korean newspaper report that a senior Arcelor Mittal executive had expressed interest in POSCO's M&A strategy during a meeting with chief executive Lee Ku-taek, in Seoul last month.

The report, which appeared in this morning's edition of the Korea Economic Daily, cited an unnamed POSCO executive as having said that a senior Arcelor Mittal executive had expressed interest in the Korean steel maker's M&A strategy while visiting POSCO chief executive Lee Ku-taek, in Seoul last month, indicating a hostile take over interest by the European firm.

The POSCO executive had been quoted as having told the paper, that the meeting indicated that Arcelor Mittal had put POSCO on its M&A list and POSCO's top management was pondering how to react to a potential hostile takeover bid.

While confirming that Roland Junck, who is on the management board of Arcelor Mittal, had met POSCO's CEO last month and discussed consolidation in the global steel industry, POSCO has denied any discussions on its own consolidation or M&A strategy with Junck.

The Korean steel company has a fragmented and predominantly foreign shareholding, which leads analysts to say that the Korean steel maker could be a prime a takeover candidate, citing its cash flow, size of debt and cheaper share prices. Since Mittal Steel's acquisition of its rival Arcelor, the combined Arcelor Mittal is regarded as a potential acquirer for POSCO.

To ward off any potential hostile acquisition, POSCO has tried to build alliances through cross-shareholdings with other Asian steel makers. The world's second largest steel maker, Nippon steel, recently completed increasing its stake in POSCO by two percentage points to five per cent.