It's precisely the sort of story that keeps Fools raptly attentive to the equities markets and ever hopeful of big paydays: In mid-2005, Chaparral Steel
Chaparral, whose shares closed at $83.67 on Wednesday, up 10.5% on the day, is North America's second-largest manufacturer of structural steel products. The company can annually produce nearly 3 million metric tons of steel beams, bars, and other related products from its two mini-mills. It primarily serves the commercial construction industry, but its products are also used in defense, automotive, energy, and manufactured housing applications.
For its part, Gerdau Ameristeel is North America's fourth-largest steel company and its second-largest steel mini-mill operator, with an annual capacity of more than 9 million tons. Its products also make their way into the construction, automotive, mining, and electrical industries. The company is based in Tampa but is 67% owned by Brazil's Gerdau S.A.
In announcing its offer, Gerdau management stated that it would consider an equity offering to tidy up its balance sheet once the acquisition has been completed. Management expects that combination to be slightly dilutive to earnings through 2008.
And so we have here the latest iteration in big steel companies buying smaller, specialized operations. Earlier this year, for instance, U.S. Steel
To those Chaparral shareholders among you: Hearty congratulations. The rest of us might be well advised to redouble our attention to Western steel products manufacturers.
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