Merger threat to steel jobs

HUNDREDS OF steel jobs are set to be axed following Thursday's pounds 40m takeover of Co-Steel Sheerness, the steel maker, by rival ASW.

Sources said that there could be up to 250 layoffs among the 3,200-strong combined workforce as ASW, in Cardiff, and Co-Steel, in Kent, strive to slash costs and reduce capacity. The enlarged group may close one of four furnaces and one of five steel mills.

The companies said the Christmas Eve deal would "inevitably lead to job losses" but gave no numbers. Michael Leahy, general secretary-elect of the Iron and Steel Trades Confederation, demanded an "urgent meeting to see how we can best protect our members interests while ensuring plants remain viable".

ASW said buying Co-Steel from Canadian parent Co-Steel Inc would "address the fundamental industry problem of overcapacity" and yield substantial cost savings. The group will be the leading steel supplier to UK construction, with over half the market, and a medium-sized player in Europe.

Insiders said the combined company, which will have annual turnover of about pounds 500m, could save pounds 20m a year by integrating production plants and administrative functions.

George Duncan, the ASW chairman who is to keep the post in the new group, said: "The intention is that in a very tough market we will be in a stronger position to compete."

The deal was part-financed by venture capitalist Candover, which is set to inject up pounds 43m in the new company, and will become one of the largest shareholders with up to 54 per cent of the group. The bulk of the holding will be in convertible loan notes - that can be exchanged for shares at a later date. Candover said it would not keep its stake in ASW and was planning to distribute it to several institutions on conversion of the notes.

Candover was understood to have picked the group's new chief executive, Graham Mackenzie, the director-general of the Engineering Employers' Federation. Mr Mackenzie, who will leave the trade body as soon as a replacement is found, is a former chief executive of United Engineering Steels. He will replace Alain Soulas, ASW's current chief executive.

Co-Steel Inc will also be a major shareholder in the new group with up to 38 per cent.