News

21.03.2008

Severstal reaches agreement to acquire Sparrows Point

OAO Severstal, one of the world’s leading metals and mining companies, today announced that it has reached an agreement to purchase Sparrows Point, a fully-integrated steel mill based in Baltimore, Maryland, United States.

Sparrows Point, currently owned by ArcelorMittal, is being sold by Joseph G. Krauss, Divestiture Trustee, as required by the Final Judgment entered on May 23, 2007 in the United States District Court for the District of Columbia (the “District Court”) in the matter known as United States v. Mittal Steel Company N.V., to settle a complaint filed by the United States Department of Justice following the merger agreement between Mittal Steel and Arcelor SA in 2006.

Severstal has agreed to acquire Sparrows Point LLC for an all cash purchase price of US$810 million. The transaction reflects a significant strategic opportunity to add complementary assets and scale to Severstal’s existing U.S. business.

Sparrows Point has a capacity of 3.6 million metric tons of crude steel and shipped 2.3 million metric tons of finished steel products in 2007; it is the only integrated producer of flat rolled steel on the U.S. East Coast and is a major North American supplier of tin mill products.

Severstal expects to realize significant business improvements and synergies at Sparrows Point in conjunction with a five-year investment program at the plant. The transaction is expected to be accretive in year one based on current projections of costs and prices and offers value creation potential. Additionally, the Company expects substantial synergies with its current U.S. operations in Dearborn, Michigan and Columbus, Mississippi. With the addition of Sparrows Point, Severstal will also improve its distribution channels and increase its geographic reach as the plant provides direct ocean access and proximity to a number of major U.S. railways and highways.

Alexei Mordashov, CEO of Severstal, commented, “With Sparrows Point, Severstal brings into its U.S. portfolio an asset with significant existing value as well as unlocked growth potential. This acquisition presents us with an opportunity to enhance productivity at Sparrows Point through our high standards of operational performance and will benefit our existing U.S. businesses. We expect to realize synergies in Sparrows Point and with SNA that will fuel increased production and profitability. We remain committed to growth in North America and believe in the long-term promise of the U.S. market; we’re confident that this acquisition will create value for our shareholders while strengthening our U.S. platform as a whole.”

Severstal and the United Steel Workers have agreed to enter into a collective bargaining agreement, reinforcing the Company’s already strong relationship with organized labor.

The acquisition is subject to customary closing conditions, including approval by the United States Department of Justice, and is expected to close in 2Q08.

Merrill Lynch & Co. is acting as exclusive financial advisor to Severstal and rendered a fairness opinion to the Board of Directors regarding this transaction. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel to Severstal.

About SeverStal:

OAO SeverStal is an international steel producer with a listing on the Russian Trading System and the London Stock Exchange. Incorporated in 1993, the company focuses on high value added and unique niche products and has a successful track record of acquiring and integrating high-quality assets in North America and Europe. SeverStal owns mining assets in Russia, thus securing its supplies of raw materials. In 2007, Severstal produced 17.5 million tons of steel. Revenues were $15.2 billion and EBITDA was $3.7 billion. EPS was $1.92.

Forward Looking Statements:

This communication may contain projections and other forward-looking statements regarding future events or the future financial performance of OAO Severstal (Severstal). Forward looking statements are identified by terms such as “expect,” “believe,” “anticipate,” “estimate,” “intend,” “will,” “could,” “may” or “might”, the negative of such terms, or other similar expressions. Severstal wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Severstal does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Factors that could cause the actual results to differ materially from those contained in projections or forward-looking statements of Severstal may include, among others, general economic conditions in the markets in which Severstal operates, the competitive environment in, and risks associated with operating in, such markets, market change in the steel and mining industries, as well as many other risks affecting Severstal and its operations.

For further information:

SeverStal

Dmitry Druzhinin, Investor Relations

Olga Antonova, Public Relations

+7 495 540 7766

Taylor Rafferty

Michael Henson

+1 212 889 4350 (o)

+1 917 902 0767 (m)

John Dudzinsky

+1 212 889 4350 (o)

+1 646 715 2980 (m)