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
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
The Rio Tinto and U.S. Steel acquisitions will follow the combination earlier this year of copper producers, Freeport McMoRan
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.
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