The job cuts will fall principally among white collar staff and are part of targetted cost savings of pounds 200m a year by 2002. Hoogovens' Dutch headquarters will close.
The merged company, to be known temporarily as BSKH, will drop the word "British" from its name. But Sir Brian Moffat of British Steel, who will be chairman of the new company, said there was no intention of closing plants.
John Bryant, who will be co-chief executive with Fokko van Duyne of Hoogovens, said: "As long as the demand is there and they remain competitive, there is every reason to keep those plants going. Clearly it makes no sense to be making plant reductions when we are talking about growing the business."
Shares in British Steel fell 7 per cent to 150.25p yesterday after it emerged that the new company will pay out 35 per cent of its earnings in dividends against the 50 per cent presently paid by British Steel. However, Sir Brian denied that the merger contained a disguised dividend cut.
The merged business will be the biggest steelmaker in Europe and the third largest in the world after Nippon Steel of Japan and PosCo of Korea, with liquid steel production of 24 million tonnes a year and sales of pounds 10bn.
Members of the Welsh Assembly have voiced fears that Llanwern, one of four integrated steel plans in the UK, could be vulnerable to closure because Hoogovens has a state-of-the art plant in Holland producing flat rolled coil for the automotive industry.
Meanwhile, trade unions have warned that up to 5,000 jobs could be at risk among the combined workforce of 66,000.
Ken Jackson, general secretary of the AEEU engineering union, which represents more than a quarter of the British Steel workforce, said: "The danger is that it is much easier to make people redundant here than in other parts of Europe. We will be seeking undertakings to ensure that does not happen."
UK trade unions will meet their Dutch counterparts later this week to agree a united front on job losses.
The merger will be accompanied by a pounds 694 special dividend to British Steel shareholders, worth 35p a share. Under the all-share offer British Steel shareholders will get 62 per cent of the new company and Hoogovens shareholders will get 38 per cent.
British Steel, which is in effect taking over the Dutch company, is paying Hoogovens shareholders a 15-20 per cent premium on the value of their existing shares. The new company will have its headquarters in London and be registered in the UK, and three of the five top executive directors will come from British Steel. The two joint chief executives will take it in turns to run the executive committee for two-year periods, after which both of them will retire.
The impetus for the merger came from Mr van Duyne, who approached Mr Bryant in early January with a proposal to combine the two companies' construction steels businesses. The talks quickly developed into full- blown merger negotiations.
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