It's all over but the weeping.
Just for the fun of it, I'm going to go out on a limb here and call an end to the bidding war for Canada's premier steelmaker, Dofasco. The reason: Today, Germany's ThyssenKruppraised its previous bid of $61.50 Canadian to $63 Canadian (about $54 in U.S. money).
With its latest bid, ThyssenKrupp has matched rival and initial Dofasco suitor Arcelor's last counterbid of $63 Canadian, confirming that both ThyssenKrupp and Arcelor are willing to pay $4.2 billion (again, in greenbacks) for Dofasco. I say this ends it, that Arcelor will go no higher, declare victory (by if not winning the prize, at least forcing a neighborhood rival to overpay for it), and go home the loser. Here's why:
First, when we last heard from Arcelor, the firm was promising to beat ThyssenKrupp's friendly takeover offer of $4.1 billion by a mere $100 million. Given that Arcelor was already tendering a rich price with its initial unsolicited $3.7 billion bid, the minimalist "raise" that it made to counter ThyssenKrupp suggested that Arcelor was already nearing its top price. Today, we see that ThyssenKrupp, too, is unwilling to take this bidding war any further.
And why should it? ThyssenKrupp's previous $4.1 billion bid already had the backing of Dofasco's board. Arcelor showed weakness and an inability to make a serious counterbid last month. And here's the kicker: London's Financial Times reported last month that when Dofasco endorsed ThyssenKrupp's bid, Dofasco signed an agreement promising to pay an $86 million breakup fee if it changed its mind. Thus, by matching Arcelor's latest bid, ThyssenKrupp has actually beaten it by $86 million -- the extra cash that Dofasco would have had to fork over if it went with the Luxembourgers.
So I say this clash of Europe's steelmaker titans is now over. All that remains is to sign the papers and conduct the post-mortem: Who's the greater fool (note the small f) in this fiasco?
(a) Arcelor, which put its financial weakness on display to the world?
(b) Or ThyssenKrupp, which has paid an exorbitant price to win Dofasco and its "invaluable" access to less-than-robust customers such as GM
I choose (c): the speculators in Dofasco's stock, who will soon be stuck holding shares of a $65 (Canadian this time) stock that will fetch no more than $63 Canadian when all is said and done.
Missed the prequels to this story? Read them in:
Fool contributor Rich Smith has no position in any of the companies mentioned in this article.