Severstal savages Celtic chiefs in bid battle

The giant Russian steel maker Severstal has attacked the management of the AIM-listed gold miner Celtic Resources as it officially launched a £161m takeover bid for the group.

Severstal sent the offer document to shareholders yesterday, saying: "The Celtic board has a history of breaking promises and destroying shareholder value; its financial performance has been abysmal."

Severstal, owned by the Russian billionaire Alexei Mordashov, announced its intended hostile bid in a note to shareholders earlier this month. The terms of the all-cash bid remain the same at 270p per share.

In its statement, Severstal said its offer "created more value in one day than the Celtic board delivered in three years".

Celtic again rejected the offer as undervaluing the group. Peter Hannen, Celtic chairman, said: "Severstal is trying to buy Celtic cheaply through this opportunistic and unsolicited offer. We expect record production levels for the company in 2007 with substantial increases in 2008, against a background of a sustained rise in the price of gold."

Brock Salier of Ambrian said Severstal had lowered the tone with "some serious mudslinging," but he reiterated that the offer was fair given its historic share price performance.

Severstal, which is advised on the bid by Morgan Stanley, said: "The board's decision to reject our 270p-per-share offer out of hand demonstrates that they are acting in their own self-interest rather than the interest of Celtic's shareholders."

A source close to the deal said: "It is now down to whether shareholders think the offer is at a healthypremium or significantly undervalued."

There have been no devel-opments in a supposed rival bid, which could convince shareholders to wait for a potential higher offer.

Severstal first approach-ed Celtic in September with a 220p-per-share bid, which was rejected. It came back with the 270p bid, again rejected, before taking the bid hostile.

Celtic has 14 days topublish an official defence document. The deadlinefor shareholders to accept Severstal's offer falls on 16 November.

The Russians need acceptances from shareholders with just under 14 per cent to wrest control of Celtic.