Germany's largest steel maker, ThyssenKrupp, announced its offer for a friendly takeover of the Canadian steel maker Dofasco, beating last week's hostile offer from Arcelor. Analysts and investors remain skeptical.
ThyssenKrupp to the rescue
German heavy industry giant ThyssenKrupp, based in Düsseldorf, said on Monday it was coming to the rescue of Canadian steel maker Dofasco by launching a friendly takeover bid to help ward off hostile predator Arcelor.
ThyssenKrupp said in a statement it was offering to buy Dofasco for 61.50 Canadian dollars per share (US $52.55, 44.80 euros) in a deal that valued the Canadian group at 3.5 billion euros.
The German group said the bid had the approval of Dofasco's management.
"The Board of Directors of Dofasco unanimously recommends that its shareholders accept the offer," it said.
An important step for ThyssenKrupp
ThyssenKrupp wants to expand its market presence in North America
The offer price represented a 40 percent premium over Dofasco's closing share price on the Toronto stock exchange on Nov. 22, 2005, the day prior to the announcement of the hostile takeover bid by European steel giant Arcelor at a price of 56.00 Canadian dollars per share.
"It further represents a 9.8-percent premium over the Arcelor bid," ThyssenKrupp said.
For ThyssenKrupp, the takeover of the Canadian company -- the largest since the German company acquired Giddings & Lewis Inc. for 628.5 million euros in 1997 -- would be an "important step" in its strategy of expanding in the area of flat-rolled carbon steel.
"The combination of Dofasco's production and distribution operations with ThyssenKrupp's existing processing activities will strengthen ThyssenKrupp's presence in the steel market in the North American Free Trade Area (NAFTA)," the company said.
ThyssenKrupp would finance the deal "in full from available cash funds."
The transaction is expected to be completed before the end of first quarter of 2006.
Investors not impressed
ThyssenKrupp shares took a plunge after the takeover announcement
Investors were not impressed by the announcement. ThyssenKrupp shares, trading higher earlier in the session, plummeted to an intraday low of 16.92 euros, down 0.64 euros or 3.6 percent on the day in a generally firmer market.
Arcelor, a European company with headquarters in Luxembourg, declined to comment on the announcement by ThyssenKrupp, while shares in the company fell 1.22 percent to 20.22 euros on the Paris stock exchange.
Arcelor had explained last week that the acquisition of Dofasco would accomplish the joint strategic objectives of gaining a presence in North America and expanding its production of steel for the auto sector.
An analyst of the steel sector, who asked not to be identified, said that Arcelor risked losing a good acquisition opportunity at a reasonable price. He also questioned the logic of the acquisition for ThyssenKrupp.
"It's negative for Arcelor," said the analyst. "But it's even more negative for ThyssenKrupp because the price is high and we're not sure what the synergies will be behind it all."