U.S. Steel Corp is to acquire Stelco Inc for about $1.1 billion to strengthen its position as a supplier of flat-rolled steel products in North America, the companies said.
Stelco, the last big Canadian-owned steelmaker, had put itself on the auction block in June after a wave of takeovers within the Canadian steel industry.
U.S. Steel will acquire Stelco for C$38.50 ($36.64) per share, amounting to about $1.1 billion, based on about 30 million fully diluted shares, according to the companies. They announced the deal late on Sunday night.
Hamilton, Ontario-based Stelco, which emerged from bankruptcy protection last year, had about $760 million of net debt on its balance sheet as of June 30, the companies said.
Shareholders owning more than 76 percent of Stelco's outstanding shares have entered into agreements with U.S. Steel committing support for the deal, the companies said.
Pittsburgh-based U.S. Steel will have annual raw steel capability of about 33 million net tons after the deal, according to the companies.
The slabs produced at Stelco's Lake Erie and Hamilton Works will expand U.S. Steel's semi-finished steel supply chain capabilities to support finishing facilities for both flat-rolled and tubular products.
Stelco also owns several joint venture interests including iron ore operations in the United States and Canada.
U.S. Steel projects the deal, expected to close before the end of 2007, will result in annualized pre-tax synergies of more than $100 million by the end of 2008. It also expects the transaction will boost earnings per share in 2008, excluding synergies and the impact of purchase accounting adjustments.
U.S. Steel said it would contribute about $31 million to Stelco's main pension plans at the deal's closing. It said it plans to make significant capital expenditures at the Hamilton and Lake Erie facilities.
Stelco, which was created in 1910 from the combination of several companies, said in June it was considering a merger, strategic partnerships, acquisitions or a sale of all or part of the company, but gave no assurance a deal would happen.
Last month, a union leader told Reuters that U.S. Steel had joined a growing list of companies looking to buy or invest in Stelco.
(Reporting by Lewis Krauskopf; editing by Valerie Lee/Rory Channing)