US Steel to buy Canadian co Stelco for $1.1 bn
US Steel, the biggest US-based steelmaker, agreed to acquire Stelco for $1.1 billion, buying the last Canadian-owned mill and adding iron ore supply as raw material prices rise.
By Agencies |
MELBOURNE: US Steel, the biggest US-based steelmaker, agreed to acquire Stelco for $1.1 billion, buying the last Canadian-owned mill and adding iron ore supply as raw material prices rise. Stelco shareholders will receive C$38.50 ($36.62) a share, from US Steel, the companies said in a statement.
That’s 43% more than Stelco’s closing price of C$26.93 in Toronto trading on August 24. Along with raw materials, the acquisition will increase US Steel’s capacity to make metal used in cars and oil rigs.
Rising material costs and competition from steel produced in China has spurred $40 billion of takeover offers for steel mills this year, according to agency data.
“Bigger is better, and steelmakers need to consolidate to bargain with the raw material suppliers,” Mark Pervan, a commodities strategist at Australia & New Zealand Banking Group, said from Melbourne. “There’s also a need to get more efficient to fight rising Chinese competition.”
US Steel gained $2.59 to $93.39 in NYSE composite trading on August 24. Spokesman John Armstrong and Stelco CEO Rodney Mott didn’t return calls. US Steel will assume $760 million of Stelco’s debt according to the statement distributed by PR Newswire on August 26.
It plans to fund the purchase using existing cash and new debt worth $900 million underwritten by JPMorgan Chase and Bank of Nova Scotia. JPMorgan is the adviser to US Steel, and CIBC World Markets and UBS advised Stelco.
The acquisition will increase US Steel’s raw steel production capacity to 33 million tonnes, adding interests in iron ore and coke operations in US and Canada. It will also result in pretax cost savings of more than $100 million by the end of 2008, US Steel said.
Tricap Management, Sunrise Partners, Appaloosa Management and other shareholders owning more than 76% of Stelco have agreed to sell their stock in the company that was founded in 1910.
That’s 43% more than Stelco’s closing price of C$26.93 in Toronto trading on August 24. Along with raw materials, the acquisition will increase US Steel’s capacity to make metal used in cars and oil rigs.
Rising material costs and competition from steel produced in China has spurred $40 billion of takeover offers for steel mills this year, according to agency data.
“Bigger is better, and steelmakers need to consolidate to bargain with the raw material suppliers,” Mark Pervan, a commodities strategist at Australia & New Zealand Banking Group, said from Melbourne. “There’s also a need to get more efficient to fight rising Chinese competition.”
US Steel gained $2.59 to $93.39 in NYSE composite trading on August 24. Spokesman John Armstrong and Stelco CEO Rodney Mott didn’t return calls. US Steel will assume $760 million of Stelco’s debt according to the statement distributed by PR Newswire on August 26.
It plans to fund the purchase using existing cash and new debt worth $900 million underwritten by JPMorgan Chase and Bank of Nova Scotia. JPMorgan is the adviser to US Steel, and CIBC World Markets and UBS advised Stelco.
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The acquisition will increase US Steel’s raw steel production capacity to 33 million tonnes, adding interests in iron ore and coke operations in US and Canada. It will also result in pretax cost savings of more than $100 million by the end of 2008, US Steel said.
Tricap Management, Sunrise Partners, Appaloosa Management and other shareholders owning more than 76% of Stelco have agreed to sell their stock in the company that was founded in 1910.
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