ThyssenKrupp ups Dofasco offer in bidding war
Saturday January 14, 1:46 pm ET
By Mantik Kusjanto and Gilles Castonguay
FRANKFURT/BRUSSELS (Reuters) - ThyssenKrupp (XETRA:TKAG.DE - News) has raised its friendly cash offer for Dofasco (Toronto:DFS.TO - News) for a second time in as many weeks to C$68 per share, valuing the Canadian steel maker at C$5.3 billion ($4.6 billion).
In a further escalation of a bidding war with rival Arcelor (Paris:CELR.PA - News), the German industrial conglomerate upped its offer by 8 percent, trumping Arcelor's hostile bid of C$63.
ThyssenKrupp, which is acting as a white knight for Dofasco, last raised its bid on January 3 to match Arcelor's bid of C$63. The latest move came without waiting for an Arcelor counter-offer.
But Arcelor, the world's second-biggest steel maker based in Luxembourg, was reported last week by a French daily to be considering making a joint offer with U.S. peer Nucor (NYSE:NUE - News).
It declined comment on the report, but a document it filed with Canadian regulators says it had considered Nucor as a partner before going ahead with its hostile bid in November.
Arcelor spokesman Luc Scheer said the steel maker had taken note of the new offer and was reviewing its options.
Flush with cash, steel makers are looking for acquisitions as prices for their products ease amid a softening in demand.
Both ThyssenKrupp and Arcelor see Dofasco as a way to boost sales in North America's automotive steel market.
As Canada's largest flat-steel maker, Dofasco sells more than a third of its steel to car makers, which offer higher margins than other sectors.
An eventual deal would follow Mittal Steel's (NYSE:MT - News) acquisition of International Steel Group for $4.5 billion, which turned it into the biggest sector player last year.
FAVOURED BID
In a joint statement with ThyssenKrupp on Saturday, Dofasco said its board had reiterated its recommendation to shareholders to accept ThyssenKrupp's offer.
Dofasco also said it had increased the break-up fee to C$215 million from C$100 million in the event that ThysseKrupp's offer was not completed under certain circumstances. The fee is part of an agreement to have ThyssenKrupp act as a white knight.
ThyssenKrupp's raised offer comes despite it having earlier expressed reluctance to enter into a bidding war.
"With this very attractive offer, we would like to make it even easier for Dofasco shareholders to tender their shares to us, so that we can pool our strengths with Dofasco and grow together," said its chief executive, Ekkerhard Schulz.
The deadline for Dofasco's shareholders to vote on the offer is extended to January 26.
ThyssenKrupp made it first bid on November 28, offering C$61.50 per share, five days after Arcelor's initial bid of C$56.
GREATER EXPOSURE
Like its smaller German rival, Arcelor is dependent on the European steel market with just minor exposure to North America.
Whereas just over three-quarters of Arcelor's revenue is generated in Europe and 8 percent in North America, 88 percent of ThyssenKrupp's carbon steel turnover relies on European demand and only 5 percent stems from North America.
ThyssenKrupp sees Dofasco and its investment in a Brazilian slab mill turning it into the world's sixth-largest producer of crude steel by tonnage from 10th largest.
On Friday, ThyssenKrupp shares ended down 0.2 percent at 19.04 euros, slightly off from a year high of 19.17 euros, in Frankfurt, while Arcelor ended at 21.91 euros, near a year high of 22.22 euros in Paris. Dofasco ended at C$65.80 in Toronto.
UBS (UBSN.VX) and Merrill Lynch (NYSE:MER - News) have been advising Arcelor on the deal, while Citigroup (NYSE:C - News) is ThyssenKrupp's advisor. |
