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Steel Makers' Shares Rise on Mittal Bid

Posted on: Friday, 27 January 2006, 15:00 CST

NEW YORK - U.S. steel makers' shares rose Friday after Mittal Steel Co. made an unsolicited $22.8 billion offer for rival Arcelor SA, a bid termed by Arcelor as hostile.

At midday, shares of AK Steel Holdings were up 85 cents, or 8.2 percent, to $11.21. Pittsburgh-based U.S. Steel Corp. stock gained $2.89, or 5.1 percent, to $59.416, and Steel Dynamics Inc. gained 4.9 percent, or $2.06, to $44.329.

Meanwhile, Nucor Corp. shares rose 5 percent, or $4.05, to $84.47. That company earlier Friday reported fourth-quarter earnings that beat analyst expectations.

Overall, U.S. steel makers' shares rose on the possibility that if the Mittal-Arcelor deal is consummated, other steelmakers could be takeover targets, analysts said.

"There are no domestic steel companies immune from takeover interest," said Longbow research analyst Chris Olin. Olin had a sell rating on North American steelmakers, but raised his rating to neutral Friday on U.S. Steel, Nucor, Steel Dynamics and AK Steel after Mittal's offer.

The bid by Netherlands-based Mittal, already the world's largest steelmaker, for Luxembourg-based Arcelor, would create a global giant capable of making more than 100 million tons of steel a year.

The combined entity would have a market value of $40 billion.

Should the deal go through, Mittal said it has a side agreement to sell to ThysenKrupp AG all the shares of Canadian steelmaker Dofasco Inc. that Arcelor had accumulated.

ThyssenKrupp and Arcelor had been in a bidding war for Dofasco and Arcelor had offered the higher price.

The Mittal offer for Arcelor and ThyssenKrupp's continued pursuit of Dofasco could indicate a move toward consolidation in the steel industry.

Deutsche Bank analyst David Martin said the deal "leaves many U.S. players out of the M&A action for now, including U.S. Steel and AK Steel." He added that "consolidation could prove a 'game changer' in steel, but consolidation still needs to go much further."

Source: Associated Press/AP Online

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