September 08, 2008

Grupo Simec to acquire Aceros DM for USD 850 million

It is reported that the Mexican steel mill Grupo Simec SAB has agreed to buy steel company Corporación Aceros DM and some of its affiliates, collectively known as Grupo San, for USD 850 million. Grupo did not indicate when it expects to complete the purchase of Aceros DM, based in the central Mexico state of San Luis Potosi. The transaction is subject to regulatory and shareholder approvals.

Simec in a statement said that 85% of the acquisition will be paid with cash generated by its operations and by a February 2007 stock public offering. Aceros DM with 1,457 workers can produce as much as 700,000 tonnes of finished goods a year.

Grupo San is a long products steel mini-mill and the second largest corrugated rebar producer in Mexico, with operations based in Mexico's San Luis Potosí state. Grupo San produces some 700,000 tonnes finished products per annum and employs nearly 1,500 people.

The statement added that the combined enterprise, including Aceros affiliate Grupo San, would have annual production capacity of 3.8 million tonnes of finished metal and 4.5 million tonnes of liquid steel. The company would have more output capacity than Altos Hornos de Mexico SA, the nation's biggest steelmaker.

Mr Alejandro Lavin an analyst with Interacciones Casa de Bolsa in Mexico City said that “The purchase will help insulate them from a slowdown in the US economy.” He said that Simec makes specialized steel that's sold to US companies like American Axle & Manufacturing Inc which supplies parts to automakers.

Mr Mario Padilla a spokesman for Industrias said that Simec accounts for 87% of the steel produced by parent company Industrias CH SAB. Simec will use cash on hand, some of which came from a stock offering last year, to pay for 85% of the purchase.

Lehman Brothers Inc bankers and lawyers from Galicia y Robles SC advised Acero owners, while Simec said it was represented by Mijares Angoitia Cortes y Fuentes SC lawyers.