SteelTown
Aug 27, 2007, 11:11 AM
Company pays premium for Stelco
August 27, 2007
NAOMI POWELL
(Aug 27, 2007)
U.S. Steel, a North American steel icon, is taking over Stelco in a $1.9 billion US deal, The Spectator has learned.
In a deal agreed to independently by the boards of both companies late last night, U.S. Steel will acquire Stelco for $38.50 Cdn in cash per share. Shares closed Friday at $26.93 per share.
Major shareholders representing 76 per cent of all outstanding Stelco shares are supporting the deal.
"Stelco is a much improved company than it was before," said U.S. Steel chairman and chief executive officer John Surma, in an exclusive interview with The Spectator last night.
Surma has no plans to reduce Stelco's workforce, which now stands at about 3,600, or to close operations.
"We wouldn't be putting this kind of money into a company to shut it down."
The buyout will see Canada's last independent steelmaker merge with a giant of the American steel industry. It also completes the takeover of Hamilton's steel sector, with Dofasco already in the hands of global steel giant ArcelorMittal.
Anyone who wanted to top U.S. Steel's offer would have to pay a break fee of between $20 million and $30 million US, said Surma.
U.S Steel is paying $1.1 billion US cash for the company and is assuming $800 million US in debt for a total of $1.9 billion US. In addition, Stelco's pension and health care liabilities are estimated to be between $1.3 billion US and $1.5 billion US.
The deal still requires the approval of the provincial government and U.S. antitrust regulators.
It is expected to close as early as November.
Stelco began exploring a sale in the spring, after a frenzy of consolidation in the steel sector saw both Sault Ste. Marie's Algoma Steel and Regina's Ipsco snapped up by foreign players.
At the time, the steelmaker had yet to turn in a single profitable quarter since emerging from bankruptcy protection in 2006. And analysts were skeptical about the firm's chances of attracting a buyer because of its outdated Hamilton operations and hefty pension and health care liabilities.
Nevertheless, a number of foreign bidders began circling the firm, including U.S. Steel, Russia's Severstal, India's Essar Global and Ukraine's Metinvest.
Stelco showed an improvement in its second quarter, showing improved productivity and a profit of $5 million before taxes and one-time charges. The results inspired cautious optimism among analysts who dubbed the quarter the first evidence of a turnaround at the steelmaker.
August 27, 2007
NAOMI POWELL
(Aug 27, 2007)
U.S. Steel, a North American steel icon, is taking over Stelco in a $1.9 billion US deal, The Spectator has learned.
In a deal agreed to independently by the boards of both companies late last night, U.S. Steel will acquire Stelco for $38.50 Cdn in cash per share. Shares closed Friday at $26.93 per share.
Major shareholders representing 76 per cent of all outstanding Stelco shares are supporting the deal.
"Stelco is a much improved company than it was before," said U.S. Steel chairman and chief executive officer John Surma, in an exclusive interview with The Spectator last night.
Surma has no plans to reduce Stelco's workforce, which now stands at about 3,600, or to close operations.
"We wouldn't be putting this kind of money into a company to shut it down."
The buyout will see Canada's last independent steelmaker merge with a giant of the American steel industry. It also completes the takeover of Hamilton's steel sector, with Dofasco already in the hands of global steel giant ArcelorMittal.
Anyone who wanted to top U.S. Steel's offer would have to pay a break fee of between $20 million and $30 million US, said Surma.
U.S Steel is paying $1.1 billion US cash for the company and is assuming $800 million US in debt for a total of $1.9 billion US. In addition, Stelco's pension and health care liabilities are estimated to be between $1.3 billion US and $1.5 billion US.
The deal still requires the approval of the provincial government and U.S. antitrust regulators.
It is expected to close as early as November.
Stelco began exploring a sale in the spring, after a frenzy of consolidation in the steel sector saw both Sault Ste. Marie's Algoma Steel and Regina's Ipsco snapped up by foreign players.
At the time, the steelmaker had yet to turn in a single profitable quarter since emerging from bankruptcy protection in 2006. And analysts were skeptical about the firm's chances of attracting a buyer because of its outdated Hamilton operations and hefty pension and health care liabilities.
Nevertheless, a number of foreign bidders began circling the firm, including U.S. Steel, Russia's Severstal, India's Essar Global and Ukraine's Metinvest.
Stelco showed an improvement in its second quarter, showing improved productivity and a profit of $5 million before taxes and one-time charges. The results inspired cautious optimism among analysts who dubbed the quarter the first evidence of a turnaround at the steelmaker.