Arcelor makes £2.14bn hostile takeover offer to Canada’s Dofasco

Arcelor makes £2.14bn hostile takeover offer to Canada’s Dofasco

	Published : Fri, 25 Nov 2005 10:05 By : Richard Owen Print this Story

Arcelor, the world’s second largest steel producer, yesterday made a £2.14bn hostile bid for Dofasco the Canadian steel company. At C$56 a share, the offer represents a 27 percent premium over its closing share price on Tuesday. The proposed acquisition would increase Arcelor’s global market share from 14-15 per cent to 17-18 per cent besides increasing its own 44m-tons-a-year output by Dofasco’s 5m-tonnes-a-year steel production capacity.

Analysts see the offer as an attempt to consolidate and match strengths with its bigger rival Mittal Steels – the world’s biggest steel producer. Both the companies together, account for about 10 percent of the world’s total steel production. Arcelor would be able to strengthen its supplies to North American automakers with the acquisition.

Dofasco chairman Brian MacNeill urged shareholders not to tender the offer “pending the board’s recommendation” which meant the Canadian company was open to an alternative bid.

Many analysts opine that it is very likely that another suitor arrives on the scene with a bigger offer because it would be a strategic asset for those looking for access to the north American steel market. The Candaian steel company has shown consistently good results in the last seven years and is an attractive buy even at a premium higher than that offered by Arcelor. The company is a regular supplier to Toyota and Ford and has a non-union workforce.

Among the companies most likely to make a rival bid are Nucor Corp of the US, Gerdau SA and Usiminas from Brazil. Gerdau already has its presence in Canada with its 202 acquisition of Co-Steel.

Arcelor has made an earlier attempt proposing a friendly merger which did not make any headway. Arcelor would need approval from two thirds of Dofasco’s shareholders to be able to complete the deal.

The current trend in the global steel industry is of consolidation as it brings control over prices.