The world's second biggest steel maker Arcelor is to buy the Russian company Severstal for 12 billion euros (15.3 billion U.S. dollars) to fend off a hostile takeover bid from the world's biggest steel maker Mittal Steel.

The merger was aimed at the creation of the world's biggest steel company with a turnover of 46 billion euros (59 billion dollars), Arcelor and Severstal said in a joint statement on Friday.

"The combination of Arcelor and Severstal will be the Number 1 steel company in the world with 46 billion euros in sales," the statement said.

Severstal's president and owner, Alexey Mordashov, "will contribute all of his economic interests in Severstals steel business" and 1.25 billion euros (1.59 billion dollars) in cash, as well as Severstal-Resource, which holds iron ore and coal assets, plus his stake in the Italian steelmaker Lucchini, the statement added.

The Severstal president has made a commitment not to increase his stake in the merged group for four years, or to sell any of his shares for the next five years.

He will receive about 32 percent of the new merged group and the position of non-executive president of the Arcelor board of directors, with Arcelor's CEO Guy Dolle remaining at the post.

On May 19, Mittal sweetened its offer for Arcelor to 25.8 billion euros (32.9 billion dollars).

Source: Xinhua