Arcelors hostile bid for Dofasco Inc.

Brussels | Updated: Nov 24 2005, 05:45am hrs
Arcelor, the worlds second largest steelmaker, announced an all-cash takeover bid for Dofasco Inc on Wednesday, valuing Canadas largest steel company at C$4.4 billion ($3.7 billion).

Arcelor, a top supplier to Europes car manufacturers, said it wants to increase its presence in the North American car market via the bid despite failing to reach a friendly deal with Dofascos board.

The Luxembourg-based group will offer C$56 for each Dofasco share, a premium of 27% over the closing market price on November 22 and 46% more than the closing price on November 10, the last trading day prior to speculation in the media about a possible bid for the Canadian company.

Dofasco has a market capitalization of about C$3.4 billion compared with 13 billion euros for Arcelor. The offer follows fruitless talks between the two sides that began in the first half of the year. Arcelor has therefore decided to present its particularly attractive offer to Dofascos shareholders directly, it said.

The global steel sector is highly fragmented, with different pricing zones and the top two steel producers representing just over 10% of total output. We believe this is a reasonably high price and a good strategic move, ING steel analyst Alain William said in a note.

Arcelor is willing to pay a high premium as it is eagerly looking for investment opportunities after being outbid in the Kryvorizshtal auction and withdrawal from the Erdemir auction, Delta Lloyd Securities said in a research note.

Rival Mittal Steel Company NV won the auction of Ukraines largest steel mill and a Turkish group was able to grab a stake in Turkish steel maker Erdemir.

Dofasco has a market capitalisation of about C$3.4 bn compared with 13 billion euros for Arcelor
Arcelor was created by merging France's Usinor, Spain's Aceralia and Luxembourg's Arbed
The Arcelor will offer C$56 for each Dofasco share
Arcelor chief executive Guy Dolle said the acquisition would be the companys most important investment in North America to date and was a measure of its confidence in the Canadian firm.

Arcelor, created in 2002 out of the merger of Frances Usinor, Spains Aceralia and Luxembourgs Arbed, has been slashing its debt to prepare for growth and acquisitions. It said earlier it could spend up to 5 billion euros on external growth and has cut its debt to 1.43 billion euros.