U.S. Steel Just Keeps Buying

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Just when you thought the pace of mergers in the mining and metals sector had to slow, yet another company comes blowing through with a proud acquisition under its arm. On Monday, we awoke to the news that U.S. Steel (NYSE: X) will buy Canadian-owned flat-rolled steelmaker Stelco for about U.S. $1.1 billion.

The price for the deal is based on a per-share purchase price of $38.50 (Canadian), which amounts to a nearly 43% premium over Friday's closing price. Hamilton, Ontario-based Stelco also trudges into the deal with about $760 million in debt. In announcing the acquisition, U.S. Steel management said it expects to realize about $100 million pre-tax in synergies from the combination by the end of 2008 and anticipates that the addition of Stelco will be additive to earnings next year. Once the acquisition has been completed (probably before the end of 2007), U.S. Steel will have annual raw steel capacity of about 33 million net tons.

As if to maintain an awareness of the rapid pace of acquisitions in the sector, London-based mining company Rio Tinto (NYSE: RTP) has also announced that it has obtained the funding necessary for its $38 billion acquisition of Canadian aluminum producer Alcan (NYSE: AL). Word is that the loan is oversubscribed, a circumstance that can occur when, even amid a credit crunch, the borrower enjoys Rio Tinto's strong financial standing.

The Rio Tinto and U.S. Steel acquisitions will follow the combination earlier this year of copper producers, Freeport McMoRan (NYSE: FCX) and Phelps Dodge. There's also been a spate of other purchases of Canadian steel companies, including Algoma Steel and IPSCO. And U.S. Steel's Pittsburgh neighbor, Alcoa (NYSE: AA), continues to pop up in deal talk.

All this tells me that with a number of sectors displaying a sort of market-induced lethargy, the major metals and mining companies continue to have the power to plow ahead at a steady speed. With specific regard to U.S. Steel, the company continues to solidify its considerable asset base, having also acquired oilfield tubular goods manufacturer Lone Star Technologies this year. And with an attractive forward P/E near 9, the company would seem to warrant a steely hard look from Foolish investors.

For related Foolishness:

• Market Testing Freeport's Mettle
• Alcoa's Force of Nature
• The Mother of All Mergers?

Fool contributor David Lee Smith doesn't meddle in any of the companies mentioned through share ownership. He does welcome your emails. The Motley Fool stands by its ironclad disclosure policy.