Tens of thousands of jobs will go in the European steel industry over the next five years as more companies succumb to takeovers and cut capacity along the lines of the proposed pounds 5bn merger between Krupp and Thyssen, writes Richard Halstead. Analysts believe that between 60,000 and 70,000 jobs will go in EU steelmaking between now and 2002, reducing the number working in the industry to below 200,000 – the lowest since the industrial revolution.
Some of the job losses will come from British Steel, which on Friday said that it would be “accelerating” its planned job cuts from the current 500 to 1,000 per year, but denied that it would be cutting 10,000 jobs over the next five years – nearly a quarter of its workforce.Industry figures said more mergers and redundancies would follow elsewhere. “The restructuring process has become permanent, with costs having to be cut at every turn to maintain competitiveness,” said a spokesman for Eurofer, the European steel trade association.Krupp and Thyssen remained locked in talks this weekend, but it seemed likely they would at least agree to merge their steel operations, if not their whole organisations. If a full-scale merger goes ahead, up to 10,000 of the 58,000 steelworkers in the new entity will face redundancy.. The Co-op has declared war on City institutions linked to whizz- kid investor Andrew Regan’s unprecedented assault, which proposes to break up the 150-year-old movement.

The fightback, in which the Co-op is threatening to bar any of Mr Regan’s backers from its lucrative pounds 3.5bn investment business, aims to halt a damaging destabilisation of the Co-op’s affairs.
It also comes as the Stock Exchange continues a major inquiry into the tenfold rise in the shares of Lanica Trust, his quoted vehicle, since October and the leak of his “plans” six weeks ago.Shares in Lanica, a shell company, have been suspended at pounds 19.50 since at the Exchange’s insistence as its patience with the speculative bubble final ran out.Through the media, Mr Regan has attempted to appeal to Co-op members directly with the aim of prising loose its non-food businesses, including the Co-op Bank.Cynics say the hype is as likely to be aimed at diverting attention from the inquiry as it is to be a serious takeover bid.No formal proposal for his ambitions, which run anywhere from pounds 500m to pounds 8bn, has yet been tabled – or is ever likely to be, the Co-op says.Co-operative Wholesale Society chairman Graham Melmoth has now written to Lord Hambro, chairman of Lanica’s merchant bank Hambros, and to Schroders, one of its known institutional backers, to demand where their loyalties lie.At stake is pounds 2bn of income annually from the Co-op Insurance Society, which may be invested through the banks’ fund management arms and other institutions.Warning letters have also been sent to Lloyds TSB and Mercury Asset Management Both have both been linked to Mr Regan in press leaks. MAM manages the largest slice of CWS’ pounds 1.5bn pension fund after a 25- year relationship with the Co-op.”The CWS would view Lloyds/TSB as acting in a manner hostile to our interests on a project that has no prospect of success,” Mr Melmoth wrote last week to the bank’s chairman, Sir Brian Pitman.The Co-op is being advised by SBC Warburg banker Brian Keelan and City lawyers Linklaters and Paines. The counter-attack has drawn quick denials all round.Lloyds TSB sources say they have no intention of leading bank funding for a bid. MAM chairman Hugh Stephenson meanwhile has replied to say that it is neither an investor in Lanica nor a backer of Galileo, the special purpose vehicle for Mr Regan’s ambitions. “We were approached by Lanica with a view to supporting their bid and declined to do so,” Mr Stephenson wrote.

MAM denies Lanica’s assertions that it was the source of the original leak.Mr Melmoth is understood to be doubly furious that uncritical press reports have given Mr Regan unwarranted credibility.According to its last accounts, Guernsey-based Lanica had net assets of just pounds 2.9m. Some 65 per cent of its shares are owned by finance director David Lyons and tax haven companies in the West Indies, British Virgin Islands and Monaco.Mr Regan shares directorships of the companies with Michael Charlton, a Monaco-based broker, and four other Monaco investors – Antoine Awad, Chiew-Siew Lee, David Sinclair and David Banfield – about whom little is known.Galileo meanwhile is backed by Lanica, Schroders, Jupiter, brokers Killik & Co and controversial Tory MP David Evans.Neither Lanica, its brokers HSBC James Capel nor the Stock Exchange would elaborate on the inquiry into dealings in the trust’s shares. “We’re still in discussion with the company over several aspects relating to its affairs,” an exchange source said.. The US tobacco giants are preparing to negotiate a secret settlement with their government to end a wave of outstanding litigation against the industry. The impetus for a deal increased last week, with a unilateral settlement by Liggett, maker of the Chesterfield brand, with 22 states that have filed anti-smoking lawsuits.
Tobacco shares have been under pressure for the past year because of the litigation and were hit by renewed selling again on Friday.Britain’s BAT Industries, which owns Brown & William-son, the third biggest US tobacco company, is already spending $100m (pounds 62m) a year on legal fees – a sum matched by the two other majors, Philip Morris and RJR Nabisco.Liggett, headed by corporate raider Bennett LeBow, is the weakest player in the market, and the big three are unlikely to match its offer – over a quarter of annual profits – without guarantees over further outstanding class actions.The industry could afford a multi-billion dollar compensation package, however, in return for immunity against any further legal challenges.The industry has adopted a policy of not commenting on its own internal discussions or those it is holding with the US government, which would need Congress to pass a new law to deliver any deal.However, analysts are convinced that talks are underway following the steady stream of acceptance by the main players that they would be prepared to agree a deal that was in the best interests of investors.”The only way a proper settlement can be reached is at federal level and that means going through Congress,” said Nyren Scott-Malden, tobacco analyst at brokers Barclays de Zoete Wedd.”The federal authorities would also like a settlement. There’s some delicate dancing going on,” he said.Speculation that a settlement is on the agenda was fuelled by a Philip Morris filing earlier this month with the US Securities and Exchange Commission in which it said it “may enter into discussions with appropriate parties”.However, the company made clear that any negotiations would remain a secret. “Were that (the discussions) to happen, the company would not contemplate making any further comment as to the existence or progress of any such discussions,” the company said.The tobacco industry’s recent hiring of two Washington law firms and a political lobbyist have added to the market’s conviction that a deal is on the cards..

British Telecom will have to sell the stake owned by MCI in Rupert Murdoch’s News Corporation if it is to receive regulatory approval for its merger with the US phone company, according to a Commons report published last week. The Trade and Industry Select Committee paper on telecommunications slipped out almost unnoticed in the flurry of activity before Parliament was prorogued on Friday. It recommends that Oftel, the industry watchdog, should force MCI to sell its 9 per cent stake in News Corporation acquired two years ago as part of a $2bn (pounds 1.25bn) investment in the company.
The MPs on the committee, which has a Tory majority but a Labour chairman, said that BT might use the stake to bypass the laws that currently prohibit it from being a broadcaster.At the time of the merger announcement, BT indicated that it would not allow potential conflicts from its direct stake in News Corporation to get in the way of a deal.Under the terms of the original $2bn investment, MCI agreed to put its satellite broadcasting licence, valued at $600m, into the ASkyB US satellite joint venture with Mr Murdoch. That deal might unravel if the stake is sold.MCI also has the right of first refusal to buy the Murdoch family holding should they choose, or be forced, to sell out.In recent weeks, however, BT executives have become more confident that the company can complete the MCI tie-up without having to sell out of News Corporation.Last month Dr Alan Rudge, BT vice chairman, told Australian television that “we won’t sell unless there are some constraints put on us that make it necessary.”BT is currently prevented by law from delivering moving pictures into the home. However, that restriction could be lifted by an incoming Labour government.The company already has extensive ties with Mr Murdoch.