Essar Steel to acquire Algoma Steel for $1.58 billion

Mumbai: Essar Steel has agreed to acquire Algoma Steel of Canada for C$1.8 billion (approximately $1.58 billion) in cash. The acquisition is being made through Essar Global's steel arm Essar Steel Holdings Ltd.

The offer price of C$ 56 per share represents a premium of 48 per cent to Algoma's stock price for the 20 day period ending on February 14, 2007 when Algoma confirmed that it was in discussions regarding a potential transaction, a joint statement by the two companies said.

"We believe Algoma is an excellent addition to our existing steel business and also offers growth potential. This acquisition fits in with our global steel vision of having world class low-cost assets with a global footprint," said Shashi Ruia, chairman, Essar Global Ltd, an arm for Essar Groups' international operations.

"The board of directors unanimously supports the Essar proposal as it reflects a significant premium to the historical share price of Algoma," Benjamin Duster, chairman of Algoma's board of directors, said.

The deal must be approved by Algoma's shareholders by the affirmative vote of at least 66 per cent of the votes cast, in person or by proxy, at a shareholders meeting, and is subject to customary closing conditions and other necessary regulatory approvals.

The support agreement provides for payments to Essar in the event that the acquisition is not completed under certain circumstances.

Sault Ste. Marie, Ontario based Algoma Steel is an integrated steel company, which is primarily into the manufacture and sale of rolled steel products, including hot and cold rolled steel and plates. Algoma reported steel shipments of 2.4 million tonnes in 2006 and revenues of C$ 1.9 billion.

Essar Global, which operates in areas such as steel, oil and gas, power, communications, shipping and logistics and construction, is expecting revenues of around $10 billion by the end of 2007-08.

UBS Investment Bank is acting as exclusive financial advisor to Essar and sole arranger of Essar's transaction financing. Stikeman Elliott LLP is acting as legal counsel to Essar, and Torys LLP is acting as legal counsel to Algoma Steel.