December 02, 2008
US Steel to acquire Stelco
United States Steel Corporation and Stelco Inc announced that they have entered into a definitive agreement pursuant to which US Steel will acquire Stelco for CAD 38.5 in cash per share. Under the terms of the definitive agreement, US Steel will acquire all of the outstanding shares for an aggregate value of approximately USD 1.1 billion based on approximately 30 million fully diluted shares. The acquisition will be accomplished as a Plan of Arrangement under Canadian law. The acquisition is subject to review by US and Canadian regulatory authorities and other customary conditions and is expected to close before the end of 2007.
Shareholders owning more than 76% of Stelco's outstanding shares, including Tricap Management Limited, Sunrise Partners Limited Partnership, Appaloosa Management LP and Mr Rodney Mott CEO of Stelco have entered into agreements with US Steel irrevocably committing to support the transaction.
US Steel has also made commitments to the Province of Ontario with regard to Stelco's main pension plans and operations in the Province. US Steel plans to make significant capital expenditures at the Hamilton and Lake Erie facilities and to endow a Priority Chair in the Department of Materials Science and Engineering at McMaster University to facilitate the continuing development of steel making technology in Ontario.
US Steel expects the acquisition of Stelco to strengthen its position as a premier supplier of flat rolled steel products to the North American market. Stelco's Lake Erie Works is the most modern integrated steel plant in North America and the slabs produced at Stelco's Lake Erie and Hamilton Works will expand US Steel's semi finished steel supply chain capabilities to support finishing facilities for both flat rolled and tubular products. Stelco also owns several JV interests including iron ore operations in the United States and Canada, and a 60% interest in Z-Line. After the acquisition, US Steel will have annual raw steel capability of approximately 33 million net tons.
Mr John P Surma chairman & CEO of US Steel said "Our acquisition of Stelco is another example of how we are building value for our stakeholders. From the increased utilization of our Minnesota Ore Operations through the conversion of slabs and hot bands produced at Stelco by our other finishing facilities, this transaction optimizes our operations and allows us to better serve our customers. With major facilities located on both sides of the Great Lakes, this acquisition will significantly increase our ability to respond to market demands and our customers' needs.”
Mr Rodney Mott president & CEO of Stelco said "The fit with US Steel is excellent. This is an outstanding deal for Stelco's owners, employees, customers, suppliers and communities. Our goal through the Stelco restructuring process was to re establish Stelco as a competitive steel company and position it to be part of a larger, stronger company that can provide additional security for our employees and their communities. Our transaction with US Steel represents the successful conclusion of an exhaustive review of opportunities for Stelco. US Steel brings the financial strength, operating experience and advanced research and technology capability that are critical for the continued success of the Stelco facilities."
JP Morgan Securities Inc acted as financial adviser to US Steel and CIBC World Markets and UBS were financial advisers to Stelco. Morgan Lewis & Bockius and Osler Hoskin & Harcourt served as counsel to US Steel and McCarthy Tetrault served as counsel to Stelco.
