Celtic returns fire at steel giant Severstal

Celtic Resources yesterday hit back in the escalating war of words with the Russian steel giant Severstal, which is preparing to launch a hostile bid for the group, slamming its offer in a letter to shareholders.

The terse note, signed by the Celtic chairman Peter Hannen, detailed the reasons why it had rejected Severstal's indicative offer, claiming that it failed to recognise Celtic's strategic position, planned growth and an expected rise in gold prices.

"Celtic's prospects as an independent company are excellent. Severstal is trying to buy Celtic without paying for these prospects. You should not accept Severstal's proposed offer," it added.

Mr Hannen also hit back at allegations made by Severstal that Celtic had not properly considered the offer, that the company had a "confused strategy", and that failure to do a deal would smash the share price.

Severstal was sticking to its guns last night, however and issued a rebuttal of its own. The Russian group, which holds a 29.7 per cent stake in Celtic, has threatened to remove Celtic's management and run it as a subsidiary, if it fails to attain the targeted 80 per cent acceptance levels.

Brock Salier, analyst at the broker Ambrian, said: "The mud-slinging has started. Celtic's acerbic reply represents a bit of 'tit-for-tat' on who said what when."

Severstal, owned by the oligarch Alexei Mordashov, first approached Celtic at the beginning of September with a 220p-per-share offer, which was rejected. After the emergence of an unnamed rival bidder several weeks later, the steelmaker returned with an indicative 270p-per share bid, which was again rejected.

Severstal has since decided to pursue a hostile bid, and wrote to shareholders earlier this week advising them to expect a formal offer document before 26 October.

Ambrian's Salier said: "We think shareholders should accept the offer – with the less certain alternative being to wait for what management might be able to produce in the next year or so."