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                         Villacero Announces the Formation of a

                           Strategic Alliance  with Arcelor Mittal

 

Monterrey, Mexico. December 19, 2006. Villacero is pleased to announce that it has reached an agreement to establish a strategic alliance with Arcelor Mittal, including the formation of  a commercial joint venture for the sale and distribution of rebar, wire rod, merchant bars and other long products in Mexico. 

 

Arcelor Mittal and Villacero have agreed on a 50-50 commercial joint venture which will focus on distribution and marketing of long products in Mexico and the Southwestern U.S.  The joint venture will capitalize on Villacero’s existing commercial network covering Mexico and NAFTA in order to market Sicartsa, Border Steel, Arcelor Mittal and Lámina y Placa products within the region. Lakshmi N. Mittal and Julio Villarreal, as the company founders, will jointly chair this commercial venture.

 

In addition, through a series of long term supply agreements, Arcelor Mittal will provide long and flat steel products to Villacero’s service centers and wire and tube processing facilities.

 

In connection with this transaction, Villacero has also agreed to divest to Arcelor Mittal  100% of the equity interests in Siderúrgica Lázaro Cárdenas las Truchas, S.A. de C.V. (Sicartsa), Villacero’s mining and long steel production arm in Mexico, and Border Steel, Inc. (Border Steel), a mini-mill producer of rebar and grinding media located in Texas. The combined steel making capacity of the divested facilities is approximately 2.6 million tons per year. This transaction valued the company at US$1,450 million.

 

 

Julio C. Villarreal, Villacero’s Chairman of the Board and CEO told: “We believe that Sicartsa and Border Steel divestiture takes place at the right time for the Mexican steel industry”.

 

“We should recognize that thanks to its global leading position, geographic location in Mexico and complementarity with Sicartsa operations, Arcelor Mittal provides the strongest platform for Sicartsa and Border Steel’ assets development, but most importantly, for the development of these companies’ workers. Given the prevailing consolidation environment all across the global steel industry, a strategic alliance as this one will allow us to meet the objectives of our strategic program Villacero 20-20”, Villarreal said.

 

Villacero is the largest distribution and marketing company of steel products in Mexico. Through these transactions, Villacero companies in Mexico and abroad will consolidate their presence in the steel markets; at the same time, Arcelor Mittal will leverage on the marketing expertise of Villacero Group and the favorable cost structure of Sicartsa to significantly expand its commercial and production presence in Mexico.

 

Fulbright & Jaworski and Kuri Breña, Sánchez Ugarte, Corcuera y Aznar law firms acted as Villacero’s legal advisors on this transaction. UBS Securitires, L.L.C. and Miller Mathis, Co. acted as the company’s financial advisors.