29 Agustus 2007
US Steel to Acquire Canada's Stelco for $1.1 Billion in Cash

Pittsburgh United States Steel Corp. is buying Canadian steel maker Stelco Inc. for about US$1.1 billion in a move expected to bolster its position as a supplier to the North American automotive industry. The Pittsburghbased company said the cash deal will increase its production capacity to about 33 million net tons of raw steel annually, up from its current yearly capacity of 26.8 million tons, making it the world's fifthlargest steel maker.

Steel slabs produced at Stelco's Lake Erie and Hamilton plants will be sent to U.S. Steel facilities that finish flatrolled steel — used in the auto and appliance industries and tubular steel used mostly in the energy sector, the company said.

Stelco emerged from bankruptcy protection last year and announced plans to cut 15 percent of its work force after settling a new fouryear contract with the United Steelworkers union. John Surma, U.S. Steel's chairman and chief executive, said the planned acquisition was important strategically.

"We have some optimism about the longterm outlook for North American steel," he said in a .conference call with analysts and reporters Mon
day. "(Stelco) fits nicely into our Midwestern consumption patterns." Surma said Stelco's management team had done an "excellent job" of restructuring the company, partly through facility shutdowns, and that it could become a "very highperforming" part of U.S. Steel's business.
Rodney Mott, Stelco's president and chief executive, said in a statement that the goal of the restructuring 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."
U.S. Steel said it plans major capital improvements at Stelco's Hamilton and Lake Erie plants. It is also guaranteeing Stelco's pens.ion fund
ing obligations under an agreement reached last year with the province of Ontario. U.S. Steel also will make a voluntary contribution of $31 million to Stelco's main worker pension plan.
Global steel makers have been consolidating in recent years to deal with intense competition, the need to reinvest in aging mills and new opportunities in Asia.

Earlier this year, U.S. Steel completed a $2 billion deal to acquire Texasbased Lone Star Technologies Inc., which makes welded pipe used in oil fields.
Charles Bradford, an indus try analyst with Bradford Research/Soliel Securities in New York, said U.S. Steel's acquisition of Stelco would improve its position in the automotive sector.
He noted that the automotive industry accounted for the largest portion — 38 percentof Stelco's business, and that the combination would raise U.S. Steel's automotive industry shipments from 18 percent to 22 percent of total business. It will also expand U.S. Steel's customer base in the construction industry.
It is also a good fit geographically, he said, pointing to the close proximity of Stelco's Lake Erie plant--the most modern integrated steel plant in North America — to a U.S. Steel facility in the Detroit area.

U.S. Steel said the deal would strengthen its position asa supplier of flatrolled steel products to the North American market.

Under terms of the deal, U.S. Steel will pay C$38.50 ($36.73) per share for Stelco's 30 million shares outstanding. As of June 30, Stelco had about $760 millio*n of net debt on its balance sheet.

Sumber : The Jakarta Post, 29 August 2007 (From Associated Press)

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