ThyssenKrupp backs out, Arcelor wins Dofasco
By Our corporate bureau | 24 Jan 2006
Arcelor, the world's second biggest steelmaker, won the bidding war to acquire Dofasco, Canada's biggest flat steel maker, when rival bidder ThyssenKrupp threw in the towel, citing the high cost as a deterrent. Dofasco, which earlier announced receipt of ThyssenKrupp's notification backing out of the bidding, said it had accepted Arcelor's irrevocable C$5.6 billion ($4.9 billion) cash offer.
A joint statement from Arcelor and Dofasco says the Canadian company's board of directors has agreed unanimously to accept Arcelor's C$71 per share offer after ThyssenKrupp refused to raise its C$68 per share bid. The Dofasco board will recommend the Arcelor offer to the company's shareholders.
The latest Arcelor offer is 61 per cent higher than Dofasco's closing price on the day before Arcelor made its first hostile bid in November. The battle had begun in November 2005, when Arcelor made an unsolicited bid for Dofasco. The Canadian company's board had rejected the offer, and ThyssenKrupp had come forward as a white knight.
Dofasco produces about 5.5 million tons of steel annually in Canada, the US and Mexico. It sells over a third of its steel to car makers, and accounts for a 10 per cent share of that market. The Dofasco acquisition will expand Arcelor's presence in the North American automotive steel market, where margins are higher than in other sectors.
"We are convinced that the quality of Dofasco's operations and our superior synergies will create value for all shareholders," Arcelor's chief executive Guy Dolle said in the statement. Arcelor shares rose on the Paris bourse following the latest announcement.
Curiously, ThyssenKrupp shares rose even higher on the Frankfurt exchange. The ThyssenKrupp withdrawal has been seen positively, even though it means loss of an opportunity to expand in North America, because the acquisition might have turned out to be too expensive for ThyssenKrupp's ambitious earnings targets to be met. The ThyssenKrupp management says it remains committed to expanding in North America.
