British Steel PLC - Re Proposed Merger, etc.

RNS No 3718w
BRITISH STEEL PLC
7 June 1999

Not for release or distribution in or into the United States, Canada,
Australia or Japan.  The proposed public offer for Hoogovens Ordinary Shares
will not be made in or into the United States.

               PROPOSED MERGER OF BRITISH STEEL AND HOOGOVENS

The Boards of British Steel plc and Koninklijke Hoogovens NV have agreed in
principle to propose to their respective shareholders a merger to form a new
group, initially to be called BSKH.

The proposed Merger will create a leading metals group, with a strong customer
base and geographic spread and proven strength in innovative applications,
product quality and efficiency and customer services.

British Steel shareholders and Hoogovens Ordinary Shareholders will receive
shares in BSKH.  In addition, British Steel shareholders will be entitled to
receive a cash payment from BSKH upon Completion of 35p per existing British
Steel share equivalent to approximately #694 million (approximately Euro 1.1
billion).

British Steel shareholders will hold approximately 61.7 per cent and Hoogovens
Ordinary Shareholders approximately 38.3 per cent of the issued ordinary share
capital of BSKH.

The combined turnover of British Steel and Hoogovens, for their respective
last financial years was approximately #9.4 billion (Euro 14.6 billion).  The
market capitalisations of British Steel and Hoogovens as at 1 June 1999 were
#2,651 million (Euro 4,109 million) and Euro 1,590 million (#1,026 million)
respectively.  Based upon these values, the enlarged group would have a
combined market capitalisation, after deducting the #694 million payment by
BSKH to British Steel shareholders, of #2,983 million (Euro 4,624 million).

The proposed Merger provides the opportunity for significant cost savings in
central overheads, purchasing and logistics and for the sharing of best
operating practices across the enlarged group.  Operating cost savings are
expected to total approximately Euro 300 million (#194 million) per annum by
the third full year of trading following Completion.

The Board will be chaired by Sir Brian Moffat with Mr H de Ruiter as deputy
Chairman.  Mr J F van Duyne and Mr J M Bryant will be joint Chief Executives. 
Other executive and non-executive directors will be drawn from the boards of
both British Steel and Hoogovens.

BSKH plc will be incorporated in the UK, headquartered in London and will seek
listings on the London, Amsterdam and New York Stock Exchanges.  BSKH will
adopt a new name prior to Completion.

The proposed Merger is expected to become effective in the Autumn of 1999. 
The enlarged group will report its first set of full financial results for the
period to 31 December 2000.

It is envisaged that the new company will pay dividends of around 35 per cent
of its estimated average annual earnings over the course of the business
cycle.  It is expected that the first BSKH dividends will be paid in September
2000 (interim) and in May 2001 (final).

Commenting on the announcement, Mr J M Bryant, CEO of British Steel, said: 

"I am confident that this strategic merger of two strong companies will create
a unique group which will be to the long term benefit of shareholders,
customers and employees."

Mr J F van Duyne, CEO of Hoogovens, said:

"The combination of two strong companies to form a leading metals specialist
will create unique opportunities in our markets and is expected to generate
value for all our stakeholders."

London Briefings

There will be briefings for institutional investors and analysts at 12.00 BST
and for the press at 14.00 BST today, at the Sedgwick Centre, Aldgate, London.

Amsterdam Briefings

There will be briefings for institutional investors and analysts at 09:00 ECT
today at the Okura Hotel, Ferdinand Bolstraat 333, Amsterdam and for the press
at 09:00 ECT today at the Hilton Amsterdam, Apollolaan 138, Amsterdam.

British Steel has today also released its preliminary results for the 53 weeks
ended 3 April 1999.

This summary should be read in the context of the full text of this
announcement.

British Steel has been advised by Credit Suisse First Boston.  Hoogovens has
been advised by Warburg Dillon Read.  Cazenove & Co. is broker to British
Steel.

Formal documentation is expected to be posted to shareholders by the end of
July 1999 (save that the proposed public offer for Hoogovens Ordinary Shares
will not be made, directly or indirectly, in or into the United States, and it
will not be permitted to be accepted in or from the United States).


Enquiries:

British Steel                                       Hoogovens
[phone] on 7 June 1999                     [phone]
[phone]/3/4 thereafter        

Credit Suisse First Boston                          Warburg Dillon Read
[phone]                                    [phone]
Richard Gillingwater                                Chris Brodie
Henry Lloyd       
Stuart Upcraft       

Cazenove & Co.       
[phone]       
James Findlay       
Arthur Drysdale       

                           Financial Dynamics
                    [phone] on 7 June 1999              
                      [phone] thereafter
                               Nick Miles
                          Julian Hanson Smith

This press release has been issued by British Steel and Hoogovens.  It has
been approved by Credit Suisse First Boston (Europe) Limited ("Credit Suisse
First Boston") and Warburg Dillon Read, a division of UBS AG, ("Warburg Dillon
Read") for the purposes of Section 57 of the Financial Services Act 1986. 
Each of Credit Suisse First Boston and UBS AG is regulated in the UK by the
Securities and Futures Authority.

Credit Suisse First Boston, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for British Steel and no
one else in connection with the proposed Merger and will not be responsible to
anyone other than British Steel for providing the protections afforded to
customers of Credit Suisse First Boston, nor for providing advice in relation
to the proposed Merger.

Warburg Dillon Read, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for Hoogovens and no one
else in connection with the proposed Merger and will not be responsible to
anyone other than Hoogovens for providing the protections afforded to
customers of Warburg Dillon Read, nor for providing advice in relation to the
proposed Merger.

Not for release or distribution in or into the United States, Canada,
Australia or Japan.  The proposed public offer for Hoogovens Ordinary Shares
will not be made in or into the United States.

             PROPOSED MERGER OF BRITISH STEEL AND HOOGOVENS 


1. Introduction

The Boards of British Steel plc ("British Steel") and Koninklijke Hoogovens NV
("Hoogovens") have agreed in principle to propose to their respective
shareholders a merger to form a new group, initially to be called BSKH (the
"Merger").

BSKH will be a leading metals group with international reach and an extensive
portfolio of products and services, including a strong presence in the areas
of carbon steel, engineering steel, stainless steel and aluminium. The
combined business will have the operational, financial and management
resources to pursue profitable growth opportunities offered by:

  metals applications tailored to customer needs;
  
  a strong product portfolio;

  geographically complementary market positions;

  sharing of knowledge and competence across metals application technologies  
  and production facilities; and

  optimisation of manufacturing, logistics and sourcing arrangements.

The proposed combination of British Steel and Hoogovens represents a major
strategic move designed to deliver benefits to shareholders, customers and
employees.  The enlarged group will encompass the carbon steel activities of
British Steel and Hoogovens, as well as the Hoogovens aluminium activities and
British Steel's interest in the stainless steel activities of Avesta Sheffield
AB ("Avesta Sheffield").  Based on the combined product application know-how,
BSKH will provide services and solutions in steel and aluminium to customers
on an international basis.  Shareholders will benefit from the opportunity to
realise synergies not available to British Steel and Hoogovens on an
independent basis. 

British Steel and Hoogovens are committed to creating a group which will
target high standards of employee relationships, social obligations and
stakeholder care as well as strong principles of shareholder value and
corporate governance.  These attributes will provide opportunities to
employees with the objectives of maintaining competitiveness and creating
prosperity. 

Under the proposed terms of the Merger, British Steel shareholders will
receive shares in a new UK holding company, BSKH, and cash in exchange for
their existing British Steel shares (consideration is being given to making
available a loan note alternative to the cash payment for British Steel
shareholders who so elect); and Hoogovens Ordinary Shareholders will receive 

BSKH shares in exchange for their holdings.  Appropriate proposals are being
considered in respect of the Hoogovens "A" preference shares.

Following Completion, existing British Steel shareholders will hold
approximately 61.7 per cent and existing Hoogovens Ordinary Shareholders
approximately 38.3 per cent of the issued ordinary share capital of BSKH
(assuming full conversion of the Hoogovens Convertible Bonds and the Hoogovens
Personnel Bonds and no other issue of any British Steel shares or Hoogovens
Ordinary Shares).

The Boards of British Steel and Hoogovens consider that as part of
establishing an efficient capital structure designed to reduce the cost of
capital whilst maintaining prudent financial ratios, a cash payment should be
made by BSKH to British Steel shareholders.  The total cash amount expected to
be payable to British Steel shareholders upon Completion is approximately #694
million, equivalent to 35p per existing British Steel share.

At the close of business on 1 June 1999 (the day prior to the announcement
that British Steel and Hoogovens were in merger discussions), the market
capitalisation of British Steel was #2,651 million (Euro 4,109 million) and
that of Hoogovens was #1,026 million (Euro 1,590 million) (assuming full
conversion of the Hoogovens Convertible Bonds and the Hoogovens Personnel
Bonds), a combined total of #2,983 million (Euro 4,624 million) after
deducting the #694 million (approximately Euro 1.1 billion) cash amount
expected to be payable to British Steel shareholders. 

The combined turnover of British Steel and Hoogovens for their last respective
financial years was approximately #9.4 billion (Euro 14.6 billion).  On the
same basis, the aggregate year end shareholders' funds of the combined
businesses was #4.9 billion (Euro 7.5 billion) (after deducting the #694
million (approximately Euro 1.1 billion) cash amount expected to be payable to
British Steel shareholders and before accounting adjustments relating to the
proposed Merger).

On the basis of the balance sheets of British Steel as at 3 April 1999 and
Hoogovens as at 31 December 1998, and after deducting the proposed cash
payment to British Steel shareholders, the enlarged group would have had net
debt of #583 million (Euro 903 million) following the Merger and gearing of
approximately 12 per cent.  There is, however, likely to be an increase in the
level of gearing in 1999.

BSKH will be incorporated in the UK and the corporate headquarters will be in
London. BSKH will seek listings on the London, Amsterdam and New York Stock
Exchanges.  BSKH will adopt a new name prior to Completion.

Definitive proposals for the Merger will be made, and the Boards of British
Steel and Hoogovens intend to enter into a merger agreement, following
completion of the Dutch consultation processes.   The Merger will be subject
to certain conditions (see Section 6).

2. Background to and reasons for the proposed Merger

The Boards of British Steel and Hoogovens believe that the proposed Merger
represents a clear opportunity to create a leading metals group based in
Europe with international production and distribution capabilities, offering
customers a strong portfolio of metal products and services, singly and in
combination, based on its application knowledge capabilities.

Fundamental changes in the European metals industry present new challenges and
opportunities for all players.  The Boards of British Steel and Hoogovens
believe that the future success of their businesses requires steps to be taken
to enhance the service available to customers, which include an increasing
number of international corporations requiring suppliers with a sophisticated
technological base, broad product range and enhanced customer service.  The
new group will have the financial strength to help it sustain investment in
applications development, whilst benefiting from improved manufacturing and
logistics configuration deriving from new cost efficient manufacturing
technology.

The combined size and scope of operations will provide immediate benefits and
will also establish a platform for future growth.  Specifically BSKH will
benefit from:

  the ability to offer customers metals applications expertise and a strong   
  product portfolio;

  a more extensive geographic spread;

  a strengthened distribution and service centre network;
  
  diversification of currency exposure; and

  greater cost efficiency.

Metals applications expertise and strong product portfolio

The Boards of British Steel and Hoogovens believe the proposed Merger will be
unique in creating a group which will offer a strong portfolio of steel and
aluminium products and services for a wide variety of customers.  Management
expects that significant cross selling opportunities exist in specific steel
and aluminium product areas, where a solutions orientated approach will help
to maximise sales and profitability.

More extensive geographic spread

The complementary market positions of British Steel and Hoogovens in Europe
and the United States will help to strengthen the position of the merged group
in its core markets and enable it to offer an enhanced metals solutions
package to customers internationally.

Strengthened distribution and service centre network

The strengthening of the distribution network should allow the new group to
satisfy customer needs more effectively and to provide a seamless service to
those with multi-site and multi-product requirements.  As a customer focused
group, BSKH intends to expand its downstream operations.  The competitive
position of the combined group should be further reinforced by customised
product development, tailored to customers' quality requirements and
production processes.

Diversification of currency exposure

The greater geographic spread of BSKH's manufacturing operations will enable
the group better to manage its exchange rate exposure.
Greater cost efficiency

Whilst the strategy underpinning the proposed Merger goes beyond cost and
efficiency improvements, the realisation of such benefits is seen as a key
element of the merger strategy for the enlarged group.  The larger production
base should enable improvements to be extracted through reconfiguration of
plant, elimination of duplication and more effective utilisation of existing
capacity, and the exchange of best technological know-how and competence. 
Details are set out in Section 3 below.  

3. Synergies

The Boards of British Steel and Hoogovens believe that the proposed Merger
will enable BSKH to achieve annual pre tax cost savings of approximately Euro
300 million (#194 million) by the third full year of trading following
Completion. 

The estimated cost savings, which are based on existing major plant
configurations and are in addition to cost savings previously targeted by the
two groups on a stand alone basis, are expected to come from:

  improved efficiencies in purchasing across the range of supplies and        
  services;

  eliminating overlapping programmes and functions covering corporate, general
  administration, sales and marketing and information systems; and

  achieving greater utilisation and efficiency through optimising production  
  and logistics coupled with performance improvements from the sharing of best
  practices in areas of plant operations.

Such cost savings will be realised through specific projects, which will be
part of the integration.  A preliminary assessment of the costs of these
projects is approximately Euro 135 million (#87 million).

Furthermore, the Boards of British Steel and Hoogovens expect the revenue
enhancement opportunities referred to in Section 2 above, when combined with
opportunities for better utilisation of the group's plant,  to have a further
substantial impact on operating margins and profits in the medium term.

4. Board and Management

The proposed Merger provides the opportunity to draw on the strength and depth
of the management teams of British Steel and Hoogovens, as well as on their
highly experienced non-executive directors.  The proposed Board comprising
eight non-executive directors and five executive directors is set out below:

Chairman                            Sir Brian Moffat
Deputy Chairman                     Mr H de Ruiter
Joint Chief Executive               Mr J M Bryant
Joint Chief Executive               Mr J F van Duyne
Non-executive Director              Sir Nicholas Goodison
Non-executive Director              Mr R Hazelhoff
Non-executive Director              Mr A A Loudon
Executive Director                  Mr A P Pedder
Finance Director                    Mr J L Rennocks
Non-executive Director              Mr B K Sanderson
Non-executive Director              Mr R T Turner
Non-executive Director              Mr M C van Veen
Executive Director                  Mr A van der Velden

There will be five Board Committees, each comprising four non-executive
directors.  These will be the Integration, Nominations, Audit, Remuneration
and Environment committees.

The Executive Committee will comprise the Joint Chief Executives and the other
three executive directors, with further members drawn from current senior
management from the two groups.  Mr J F van Duyne will initially chair the
Executive Committee, for a period of two years; thereafter Mr J M Bryant will
be chairman for a further two years, at which point it is anticipated that
both will retire.  While both Chief Executives will have joint responsibility
for the enlarged group's activities, Mr J F van Duyne will have specific
responsibility for corporate strategy, finance, human resources and technology
and Mr J M Bryant will have specific responsibility for the operational
businesses of the enlarged group.  The portfolios of the other executives will
be announced once the proposed Merger has been finalised.

5. Dividends

The Board of British Steel has today recommended a final dividend in respect
of the year ended 3 April 1999 of 7p (net) per share, which will be payable in
August 1999 to shareholders of British Steel on the register on 18 June 1999.
The payment of this final dividend is not conditional on the proposed Merger,
but is subject to approval by British Steel shareholders at the Annual General
Meeting in July 1999.

Subject to and following completion of the proposed Merger, Hoogovens will pay
an interim dividend in respect of the period from 1 January 1999 to 31 March
1999 of NGL 0.75 per Hoogovens Ordinary Share.  No scrip dividend alternative
will be offered in respect of this dividend.

British Steel has historically paid dividends equal to approximately 50 per
cent of its average earnings over the business cycle and Hoogovens has
historically paid dividends of, on average, approximately 25 per cent of its
earnings.  It is envisaged that the future dividends paid by BSKH will vary
with BSKH's future earnings, cash flow and other factors affecting its
business, but that BSKH will aim to pay dividends equal to around 35 per cent
of its estimated average annual earnings over the course of the business
cycle.  This policy will cover dividends, if any, in respect of the period
from  April 1999 until Completion.  Following Completion, BSKH will consider
whether a scrip dividend alternative will be offered.

The Boards of British Steel and Hoogovens believe that the significant synergy
benefits expected to arise from the proposed Merger will allow BSKH to provide
an increasing income to shareholders over time, whilst maintaining the payout
ratio referred to above.

It is expected that BSKH will have an accounting year end of 31 December.  It
is envisaged that British Steel and Hoogovens will each prepare accounts up to
Completion and that BSKH will prepare accounts from Completion to 31 December
2000.  Following the adoption of the 31 December year end BSKH expects to pay
an interim dividend in September and a final dividend in May.

If the proposed Merger becomes effective, British Steel and Hoogovens
currently expect that the timetable for dividends to be paid in the remainder
of 1999 and in 2000 (as set out above), assuming that Completion occurs on or
prior to 31 December 1999, will be as follows:

                        Accounting Period   Date of Announcement  Payment Date

British Steel     Year ended 3 April 1999            7 June 1999   August 1999
shareholders only                     
                     
Hoogovens shareholders        Period from            7 June 1999     Following
only                    1 January 1999 to                           Completion
                            31 March 1999              

BSKH shareholders            Period ended            August 2000     September
                             30 June 2000                                 2000
                     
BSKH shareholders            Period ended             March 2001      May 2001
                         31 December 2000

The timetable set out above represents the current expectations of the British
Steel and Hoogovens Boards.  The payment of a dividend in any period cannot be
guaranteed.

BSKH will announce dividends in sterling.  It is anticipated that shareholders
will be able to elect to receive dividends in US dollars or Euros.  However,
since BSKH dividends will be determined by reference to projected earnings
calculated in sterling such shareholders can expect fluctuation between the
amounts of one dividend and the next due to exchange rate fluctuation.

6. Details of the proposed Merger

The proposed Merger will be implemented by the acquisition of British Steel by
BSKH pursuant to  a scheme of arrangement of British Steel under section 425
of the Companies Act 1985 (the "Scheme") and a public offer by BSKH for the
Hoogovens Ordinary Shares (the "Hoogovens Offer").  

The Hoogovens Offer will not be made, directly or indirectly, in or into the
United States, and it will not be permitted to be accepted in or from the
United States.  Accordingly, no public offer will be made for Hoogovens's
American Depositary Receipts. Appropriate proposals are being considered in
respect of the Hoogovens "A" preference shares.

It is intended that definitive proposals for the Merger be made and a merger
agreement be entered into following completion of the Dutch employee
consultation processes and once funding on terms satisfactory to both British
Steel and Hoogovens for the purposes of the enlarged group has been arranged. 
After entry into a merger agreement, formal documentation for the Merger will
be sent, or otherwise made available, to shareholders (save that documentation
relating to the Hoogovens Offer will not be sent or otherwise made available
in or into the United States) and the extraordinary general meetings of
British Steel and Hoogovens shareholders and a Court meeting of British Steel
shareholders.

The conditions which need to be satisfied for the Merger to be implemented
will be set out in detail in the formal documentation for the Scheme and the
Hoogovens Offer and will include:

  the passing of a special resolution by shareholders of British Steel at an  
  extraordinary general meeting;

  a separate approval of the Scheme, at a meeting to be convened by the High  
  Court, by a majority in number representing 75 per cent in value of those   
  British Steel shareholders who vote at the meeting;

  the number of Hoogovens Ordinary Shares irrevocably tendered for acceptance 
  of the Hoogovens Offer representing at least 95 per cent of the outstanding 
  Hoogovens Ordinary Shares or such lesser percentage as BSKH may decide;

  the admission to listing of BSKH on the London Stock Exchange, the Amsterdam
  Stock Exchange and the New York Stock Exchange; 

  the Stichting Hoogovens Preferente Aandelen B renouncing its right to       
  subscribe B preference shares in Hoogovens; and

  receipt of any necessary or appropriate tax clearances and regulatory and   
  other consents including merger law consents from the European Commission   
  and relevant authorities in the United States and (if necessary) Canada.

The proposed merger of BSKH and British Steel will be accounted for in the
consolidated accounts of BSKH as a merger.  In accordance with generally
accepted accounting principles, the proposed merger of BSKH and Hoogovens will
be accounted for as an acquisition in the consolidated accounts of BSKH. 
There will be one-off costs (cash and non-cash) associated with the proposed
Merger (in addition to those incurred in achieving the cost savings referred
to in Section 3 above) which will be treated as exceptional items in the
accounts of BSKH.

Application has been made for clearance under Section 707 Income and
Corporation Taxes Act 1988 in relation to the proposed Merger and the payment
to British Steel shareholders.  Neither the proposed Merger nor the payment
will be conditional on such clearance being obtained.

Clearance has been obtained from the UK Inland Revenue under Section 137
Taxation of Chargeable Gains Act 1992 in relation to the Scheme.  Thus,
subject to the clearance under Section 707 Income and Corporation Taxes Act
1988 referred to above being received, the taxation treatment of British Steel
shareholders resident for taxation purposes only in the United Kingdom who do
not hold the shares as trading stock will be as follows.  Receipt of ordinary
shares in BSKH will not be treated as a disposal of their shares in British
Steel for the purposes of chargeable gains.  Receipt of cash will be treated
as a part disposal of their shares in British Steel for the purposes of
chargeable gains.  If a loan note alternative is used the receipt of loan
notes will also be treated as a part disposal of their shares in British Steel
for the purposes of chargeable gains, but any gain arising will be deferred
until the loan notes are disposed of or redeemed.

For British Steel shareholders who are United States persons and who hold
British Steel shares as a capital asset, the US federal income tax position is
generally as follows.  Certain holders, including, but not limited to,
tax-exempt organisations, broker dealers, financial institutions, insurance
companies, US persons that hold British Steel shares as part of a position in
a "straddle" or persons owning 5 per cent or more of the BSKH shares
immediately after the exchange may not be subject to the rules discussed
below.  Subject to review of documents and other due diligence related to the
Merger and the receipt by external tax advisors of customary representations
made by management of British Steel regarding the Merger, it is the current
expectation of the management of British Steel that leading external tax
advisors will render an opinion under applicable US federal income tax law
subject to general limitations that:

(i) the receipt of BSKH shares by British Steel shareholders will not result
in the recognition of gain (or loss) with respect to the British Steel shares
cancelled; and 

(ii) the receipt of cash or loan notes from BSKH by British Steel shareholders
with respect to their British Steel shares cancelled should be treated as a
distribution in part or full payment in exchange for the cancelled shares and
treated as a capital gain.

7. Information on British Steel

British Steel is a manufacturer and distributor of a wide range of steel
products, including sections, plates, wire rod, coated and uncoated flat
products including packaging steel, engineering steels, welded tubes, rail
steels and semi-finished products for re-rolling and further processing.  In
its last financial year British Steel produced 17 million tonnes of liquid
steel.  British Steel also owns 51 per cent of Avesta Sheffield, a quoted
Swedish company which produced one million tonnes of stainless steel in its
last financial year.

The group has operations worldwide and at 3 April 1999 had 44,200 employees. 
As at 3 April 1999 80 per cent of British Steel's net assets were European
based (68 per cent in the UK), and 83 per cent of total revenues were realised
in European countries including the UK, which at 43 per cent is its largest
individual market.

Summary consolidated financial information for British Steel for the three
most recent financial years is set out in the table below:

Year ended March                                    1997       1998       1999
Turnover (#m)                                      7,224       6,947     6,259
Profit/(loss) before taxation (#m)                   451         315     (142)
Profit/(loss) after tax and minorities (#m)          310         226      (81)
Earnings/(loss) per share (p)                       15.2        11.4     (4.1)
Shareholders' funds (#m)                           4,757       4,622     4,346
Net cash (#m)                                        785         446       463

The above information is prepared in accordance with UK GAAP.

8. Information on Hoogovens

Hoogovens is a manufacturer and distributor of steel and aluminium.  Steel
products include hot rolled steel, coated/uncoated cold rolled steel and
packaging steel; aluminium products include rolled and extruded products.  In
the year to 31 December 1998, Hoogovens  produced approximately 7 million
tonnes of steel and delivered 429,000 tonnes of aluminium products. 
Approximately 79 per cent of Hoogovens products are sold to the European Union
countries including the Netherlands, 13 per cent to the United States, with
the remaining 8 per cent to other countries.  As at 31 December 1998,
Hoogovens had some 22,000 employees worldwide.

Summary consolidated financial information for Hoogovens for the three years
ended 31 December 1998 is set out in the table below:

Year ended December                                 1996       1997       1998
Turnover (Euro m)                                  3,600       4,536     4,906
Profit before taxation (Euro m)                      197         320       342
Profit after tax and minorities (Euro m)             148         226       188
Earnings per share (Euro)                           4.39        6.36      4.86
Shareholders' funds (Euro m)                       1,408       1,798     1,888
Net debt (Euro m)                                    488         589       546

The above information is prepared in accordance with Dutch GAAP.

9. Current trading

British Steel has today announced its results for the 53 weeks ended 3 April
1999.  The loss before taxation was #142m (1998: profit #315m) and the loss
per share was 4.1p (1998: earnings 11.4p).  In these results, the Chairman of
British Steel stated:  "Since the end of the financial year, I am pleased to
report that we have obtained some increases in selling prices and the volume
of business booked has improved.  We hope that this indicates that the price
recovery has begun.  The strength of sterling, however, continues to more than
offset the combined effect of these recent price increases and our cost and
efficiency improvements and this means that the Group continues to incur
losses, albeit at a lower rate than in the final quarter of the year ended 3
April 1999".

In the announcement of its preliminary results for the year ended 31 December
1998, Hoogovens stated:  "Although there are signals for stabilisation in the
steel market we consider the market situation for the time being to be too
uncertain to formulate any expectation for 1999".   Today the Chairman of
Hoogovens said:  "After a hesitant start this year, the steel and aluminium
markets are now showing the first signs of recovery, a trend which according
to the current market situation would appear to be sustained.  It is expected
that we will achieve a slightly positive result for the first six months of
the current financial year".

10. Employees

Existing employment rights, including pension rights, of employees of both the
British Steel and Hoogovens groups will be fully safeguarded.

11.  Share schemes and Hoogovens Convertible Bonds and Hoogovens Personnel    
     Bonds

Appropriate proposals in respect of the proposed Merger will be made in due
course to participants in the British Steel share incentive schemes.  British
Steel shares issued on exercise of options prior to the Court meeting for the
Scheme will be subject to the Scheme.

It is intended that upon completion of the proposed Merger the Hoogovens
Convertible Bonds, which are currently convertible into Hoogovens Ordinary
Shares, will become convertible into BSKH ordinary shares.  Appropriate
proposals in respect of the proposed Merger will be made in due course to
holders of Hoogovens Personnel Bonds.

12.  Terms of the proposed Merger

The Directors of British Steel, who have been so advised by Credit Suisse
First Boston (Europe) Limited ("Credit Suisse First Boston"), consider the
terms of the proposed Merger to be fair and reasonable.  In providing advice
to the Directors of British Steel, Credit Suisse First Boston has taken into
account the commercial assessments of the Directors of British Steel. 

The Boards of Hoogovens, who have been so advised by Warburg Dillon Read, a
division of UBS AG, ("Warburg Dillon Read") consider the terms of the proposed
Merger to be fair and reasonable.  In providing advice to the Boards, Warburg
Dillon Read has taken into account the commercial assessments of the Boards.  


Enquiries:

British Steel                                   Hoogovens
[phone] on 7 June 1999                 [phone]
[phone]/3/4 thereafter        

Credit Suisse First Boston                      Warburg Dillon Read
[phone]                                [phone]
Richard Gillingwater                            Chris Brodie
Henry Lloyd       
Stuart Upcraft       

Cazenove & Co.       
[phone]       
James Findlay       
Arthur Drysdale       

                               Financial Dynamics
                        [phone] on 7 June 1999
                          [phone] thereafter
                                  Nick Miles
                             Julian Hanson Smith

London Briefings

There will be briefings for institutional investors and analysts at 12.00 BST
and for press at 14.00 BST today at the Sedgwick Centre, Aldgate, London. 

Amsterdam Briefings

There will be briefings for institutional investors and analysts at 09:00 ECT
today at the Okura Hotel, Ferdinand Bolstraat 333, Amsterdam and for the press
at 09:00 ECT today at the  Hilton Amsterdam, Apollolaan 138, Amsterdam.

British Steel has today also released its preliminary results for the 53 weeks
ended 3 April 1999. 

British Steel has been advised by Credit Suisse First Boston.  Hoogovens has
been advised by Warburg Dillon Read.  Cazenove & Co. is broker to British
Steel.

This announcement does not constitute an offer or invitation to purchase
securities.

In order to utilise the "Safe Harbour" provisions of the United States Private
Securities Litigation Reform Act of 1995, British Steel is providing the
following cautionary statement.  This announcement contains certain statements
that are or may be forward-looking with respect to dividends, cost savings and
other synergies and cash costs and the financial condition, results of
operations and businesses of British Steel and Hoogovens and with respect to
certain of their plans and objectives.  By their nature, forward-looking
statements involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future.  There are a number of
factors that could cause actual results and developments to differ materially
from those expressed or implied by such forward-looking statements.  These
factors include, but are not limited to, statements made elsewhere in this
announcement as well as (i) the economic climate in the UK and mainland
Europe, (ii) the value of the pound sterling particularly in relation to the
Euro and changes in the global markets for steel and aluminium, (iii) market
developments, (iv) the ability of BSKH to realise the synergies expected to be
derived from the proposed Merger, (v) the ability of BSKH to achieve the
operating cost savings expected to be generated by the proposed Merger, (vi)
the availability and effective management of employees, suppliers and
technology, (vii) changes in environmental and other regulatory requirements
and (viii) business risk management.  

This announcement is not an extension of the proposed Hoogovens Offer,
directly or indirectly, in or into the United States, Canada, Australia or
Japan.  The proposed Hoogovens Offer will not be made, directly or indirectly,
in or into, and it will not be permitted to be accepted in or from the United
States, Canada, Australia or Japan.  The BSKH ordinary shares to be exchanged
for Hoogovens Shares in the proposed Hoogovens Offer have not been, and will
not be, registered under the United States Securities Act of 1933 (as
amended), nor under the laws of any state of the United States (and the
relevant clearances have not been, and will not be, obtained from the relevant
authorities in Canada, Australia or Japan) and may not be offered, sold,
resold or delivered, directly or indirectly, in or into the United States,
Canada, Australia or Japan except pursuant to exemptions from the applicable
requirements of such jurisdictions.  Accordingly, copies of the documents
relating to the proposed Hoogovens Offer will not and should not be mailed or
otherwise forwarded or distributed or sent in or into the United States,
Canada, Australia or Japan.

This press release has been issued by British Steel and Hoogovens. It has been
approved by Credit Suisse First Boston and Warburg Dillon Read, a division of
UBS AG, for the purposes of Section 57 of the Financial Services Act 1986. 
Each of Credit Suisse First Boston and UBS AG is regulated in the UK by the
Securities and Futures Authority.

Credit Suisse First Boston, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for British Steel and no
one else in connection with the proposed Merger and will not be responsible to
anyone other than British Steel for providing the protections afforded to
customers of Credit Suisse First Boston, nor for providing advice in relation
to the proposed Merger.

Warburg Dillon Read, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for Hoogovens and no one
else in connection with the proposed Merger and will not be responsible to
anyone other than Hoogovens for providing the protections afforded to
customers of Warburg Dillon Read, nor for providing advice in relation to the
proposed Merger.

                                    Appendix
Sources and Bases
1. An exchange rate of #1: Euro 1.55 has been used throughout this
announcement. 

2. The number of British Steel shares used to calculate the market
capitalisation throughout this announcement is 1,981,877,774 and excludes
existing options over British Steel shares.  The number of Hoogovens Ordinary
Shares used to calculate the Hoogovens market capitalisation throughout this
announcement is 42,175,933 ordinary shares; this represents a fully diluted
figure, after including 3,559,521 Hoogovens Ordinary Shares in respect of the
conversion of the Hoogovens Convertible Bonds and the Hoogovens Personnel
Bonds.

3. The share price of British Steel at the close of business on 1 June 1999
(the day prior to the announcement that British Steel and Hoogovens were in
merger discussions) was 133.75p.  The share price of Hoogovens Ordinary Shares
at the close of business on 1 June 1999 was Euro 37.70.

4. Gearing (net debt as a percentage of shareholders' funds) is calculated on
the basis of shareholders' funds of #4,346 million (Euro 6,736 million) and
net cash of #463 million (Euro 718 million) for British Steel as at 3 April
1999, and shareholders' funds of #1,218 million (Euro 1,888 million) and net
debt of #352 million (Euro 546 million) for Hoogovens as at 31 December 1998
and takes into account the expected cash payment to British Steel shareholders
of #694 million (Euro 1,075 million).  No account has been taken of goodwill
or accounting policy differences in determining the aggregated net debt and
aggregated shareholders' funds.  On the basis that the Hoogovens Convertible
Bonds and the Hoogovens Personnel Bonds are treated as equity for the purposes
of shareholders' funds, the shareholders' funds of Hoogovens as at 31 December
1998 would have been #1,324 million (Euro 2,052 million) and net debt would
have been #246 million (Euro 381 million).  On this basis, the aggregated
shareholders' funds of British Steel (as at 3 April 1999) and Hoogovens (as at
31 December 1998) would have been #4,976 million (Euro 7,713 million) and the
aggregated net debt (after deducting the expected cash payment to British
Steel shareholders) would have been #477 million (Euro 739 million).  This
would represent gearing of approximately 10 per cent.

Note: The financial information contained in this announcement does not
constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985.  Statutory consolidated accounts of British Steel for the
financial periods ended 29 March 1997, 28 March 1998 and 3 April 1999
respectively each received an unqualified audit opinion, did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985 and have been
in respect of the first two such years, and will be in respect of the final
year, delivered to the Registrar of Companies in England and Wales.

Definitions

BSKH                              the group to be formed by the proposed      
                                  Merger of British Steel and Hoogovens or, as
                                  the context may require, the UK incorporated
                                  company to be the parent company of such    
                                  group

Completion                        completion of the proposed Merger

Hoogovens Convertible Bonds       the Hoogovens NLG 345,000,000 convertible   
                                  subordinated bonds 1997 due 2007

Hoogovens Personnel Bonds         the 1997 and 1998 Hoogovens convertible     
                                  personnel bonds

Hoogovens Ordinary Shares         Hoogovens ordinary shares and/or Dutch      
                                  depository receipts for Hoogovens ordinary  
                                  shares, as the context permits

Hoogovens Ordinary Shareholders   holders of Hoogovens Ordinary Shares


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