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    Russian tycoon looking to merge Evraz Group, Corus - paper

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    The steel industry may see another major merger deal following last week's decision by Arcelor (Paris:LOR) and Severstal (RTS: CHMF) to create the world's largest steel maker, a leading business daily said Thursday.

    MOSCOW, June 1 (RIA Novosti) - The steel industry may see another major merger deal following last week's decision by Arcelor (Paris:LOR) and Severstal (RTS: CHMF) to create the world's largest steel maker, a leading business daily said Thursday.

    Kommersant quoted investment bank sources as saying that Roman Abramovich - also governor of the oil-rich Chukotka region in Russia's Far East - had been in talks for two weeks with British steelmaker Corus (LSE: CS, NYSE: CGA) with a view to taking a non-controlling share in the company. Abramovich has also resumed negotiations with one of Russia's leading steel producers, Evraz Group (LSE: EVR), over obtaining a blocking share package.

    Evraz Group said Wednesday its owners had informed the board of directors about their talks with Abramovich's investment vehicle Millhouse Capital, but said no agreement had been reached. Millhouse Capital declined to comment on a possible deal until talks were over, Kommersant said.

    World No. 2 Arcelor and Russia's top steelmaker, Severstal, announced a merger May 26 that will create the world's largest steel company when it goes through. Federal antimonopoly authorities have already said they will approve the deal.

    Corus Group, the world's seventh largest steelmaker, which produced about 19 million metric tons of steel in 2004 and posted 10.1 billion pounds (about $19 billion) in revenues in 2005, is 80% owned by institutional investors. However, experts said the British company is now in dire straights after net profits plummeted 73% in the first quarter year-on-year, according to Bloomberg.

    Evraz Group produced nearly 14 mln metric tons of steel in 2005, with revenues hitting $6.5 bln. It is 82.31% owned by three Russian businessmen - Alexander Abramov, Alexander Frolov, and Valery Khoroshovsky - and 14.3% of its shares are floated on the London Stock Exchange as GDRs.

    Tim McCutcheon of DMB Capital investment fund said European companies including Corus were looking for assets with low production costs, and therefore Russia's Evraz Group could be a good partner for Corus, which needs cheap raw materials.

    Corus press secretary David Jackson refused to comment on a possible deal with Abramovich, but McCutcheon said a merger could be done by Corus issuing additional shares and exchanging them for Evraz stocks purchased by Abramovich, the paper said.

    British experts also said the deal would help Corus improve its financial indicators, and help the Chukotka governor position himself as a savior of the British steel industry.

    Corus shares rose 2.37% to 4 pounds (about $7.50) per share on the LSE following reports about the possible merger.

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