Salzgitter AG and Vallourec

Salzgitter AG and Vallourec sign preliminary agreement regarding a possible acquisition of Vallourec’s precision tubes activities

Salzgitter AG, Salzgitter and Vallourec SA, Paris, signed a preliminary agreement regarding the intended acquisition of Vallourec Précision Etirage (VPE), France, a 100% subsidiary of Vallourec.

VPE is specialised in the manufacture of cold drawn precision tubes. The expected sales for 2006 will reach approximately € 220 million, two thirds being dedicated to the automotive industry and one third to other specific industrial applications. The VPE operations include five production plants in France and employ 1,230 people.

VPE’s cold finishing operations shall complement Salzgitter’s existing precision tubes activities operated by its German subsidiary MHP Mannesmann Präzisrohr (MHP) and its Dutch subsidiary, Mannesmann Robur (ROB). The combined entity is supposed to take a leading role in the respective European market.

As part of the project, Salzgitter also intends to acquire the German hot-rolling tube mill in Zeithain (Saxony) from Vallourec, thus enabling the newly combined business of MHP, ROB and VPE to be largely autonomous regarding its supply of seamless tubes hollows as feed stock. Zeithain already supplies the three entities with semi finished material. The mill employs 350 people, the envisaged output exceeds 200.000 tons of products per year in the mid term. Both Partners are convinced of the need for consolidation in the European precision tube market, which is mainly driven by the necessity to meet the increasingly demanding requirements of the relevant customer sectors. The envisaged integration of VPE into Salzgitter’s existing precision tubes activities will expand the future potential for the combined entities. Whilst MHP has a strong German client base, VPE enjoys an excellent market position in France. Additionally, the contemplated transaction shall generate considerable industrial and R&D synergies.

As a contribution to external growth, the expansion of Salzgitter’s tubes activities through the acquisition of VPE and Zeithain would represent a perfect match within the guidelines of the Group’s strategy.

The project will be subject to the approval of the Salzgitter AG and Vallourec respective supervisory boards. It will be presented to the relevant employee representative bodies both in France and Germany. Completion of the transaction is conditional upon a clearance decision by the competent competition authorities.