Salzgitter AG and Vallourec SA intend to concentrate their seamless tubes activities at Vallourec

Salzgitter AG and Vallourec SA, Paris, intend to concentrate their seamless tubes activities at Vallourec. In pursuit of this aim, the 45 % stake in V&M Tubes SA (V&M) held by wholly-owned Salzgitter subsidiary Mannesmannröhren-Werke GmbH (MRW) is to be sold to French joint venture partner Vallourec. The result will be to increase Vallourec’s interest in V&M, the world market leader in the seamless steel tubes sector, to 100 %.

The companies concerned – Salzgitter AG, MRW, Vallourec and V&M – have signed a non-binding Memorandum of Understanding which covers the essential key points of the transaction. A purchase price of € 545 million has been agreed for the 45 % stake in V&M, to be paid in cash to MRW upon transfer of the shares no later than July 31, 2005. The proceeds of the sale include the dividend payable by V&M to MRW for the financial year 2004.

At the same time MRW will increase its stake in steel producer Hüttenwerke Krupp Mannesmann GmbH (HKM) in Duisburg from its current 20 % to 30 % by purchasing a further 10 % of HKM shares presently held by V&M. V&M will retain a 20 % stake, thus remaining the third shareholder in this joint venture with Thyssen Krupp Stahl AG. HKM’s role as a major supplier of input stock to Salzgitter AG/MRW and Vallourec/V&M remains unchanged.

With the full amalgamation of V&M shares in Vallourec’s ownership, the parties to the negotiations aim to streamline the at present highly complex corporate legal structures, as well decision-making processes within the Vallourec Group. This will enable the business to react more directly and efficiently to future challenges posed by global competition.

Salzgitter AG, which currently holds 23 % of Vallourec stock, intends to remain a major shareholder and participate in positive future developments. In this context Salzgitter AG has declared its intention to partake on a pro rate basis in Vallourec’s planned increase in capital. Salzgitter and Vallourec will also be continuing their diverse and successful cooperation, amongst others, in the fields of research and development, as well in the mutual exchange of products and services.

The revenue from the sale of V&M shares will significantly enhance Salzgitter AG’s financial scope for further strategic development of the Group. Since the interest in V&M has thus far been consolidated at equity, external Salzgitter Group sales will not be affected by the transaction.

The contract is expected to be concluded towards the end of the first quarter of 2005.

The deal is subject to requisite approval by, among others, the Supervisory Boards of Salzgitter AG and MRW as well as by the relevant competition authorities.

Disclaimer: Some of the statements made in this document possess the character of forecasts or may be interpreted as such. They are made upon the best of information and belief and by their nature are subject to the proviso that no further deterioration occurs in the economy or in the specific market situation pertaining to the Division companies, but rather that the underlying bases of plans and outlooks prove to be accurate in terms of their scope and timing.