SAULT STE. MARIE, Ontario (AP) - A subsidiary of India-based Essar Global Ltd. is acquiring Canada's Algoma Steel in a cash deal valued at $1.63 billion.
The companies said in a joint statement Sunday they had signed an agreement in which Essar will purchase all outstanding shares of Algoma for 56 Canadian dollars ($49.24) apiece, or a total of 1.85 billion Canadian dollars.
The companies say the cash offer represents a 48 percent premium on Algoma's average share price over a 20-day period ended Feb. 14, when the company confirmed it was in discussions about a possible buyout with then-unidentifed parties.
The deal is unanimously endorsed by the Algoma board but conditional on the approval of two-thirds of shareholders. The company said it expects that a shareholders meeting will be held in June and that the transaction will be completed shortly thereafter.
Algoma is an integrated steel company that has focused on rolled steel for the auto, construction and manufacturing industries. It has been regarded as a takeover target for bigger steel makers in the United States, Europe, Asia or South America amid global industry consolidation. Revenues totaled 1.9 billion Canadian dollars ($1.67 billion) in 2006.
Essar Global is an international conglomerate operating in six business areas -- steel, oil and gas, power generation, communications, shipping and construction, with projected revenues of $10 billion this fiscal year.
Algoma has undergone two court-protected restructuring since the 1990s and previously failed to find a buyer after putting itself up for sale in 2005.
The sale would continue the consolidation of the Canadian steel sector, which has seen some of the industry's iconic companies scooped up by bigger rivals or restructured to stay alive.
Dofasco, of Hamilton, was acquired last year by Europe's Arcelor for 4.7 billion Canadian dollars (US$4.1 billion). Arcelor was later bought by Mittal Steel.
Stelco Inc. emerged from bankruptcy restructuring and was examined by several potential buyers -- including United States Steel Corp. -- as part of that process.
Global steel makers have been consolidating into bigger and bigger international players to deal with intense competition, the need for major reinvestment in aging mills and new opportunities in Asia.
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