U.S. Steel joins the frenzy
During the rollup of the steel industry that we have traced over the past few years (for example, here and here), U.S, Steel has been very quiet. That's understandable, as what was once one of the world's biggest companies, is much dwindled. It has barely escaped the fate of former rivals like Bethlehem Steel and Midland Steel, remaining just viable as other companies worldwide continue to grow.
But this week U.S. Steel (now the #7 steel company in the world and #1 in the US) announced its first big buy in a long time. It will pay $2.1 billion for US-based Lone Star Technologies, a company which specializes in the steel tubing used in the petroleum industry (U.S. Steel already has a major operation in this segment). That's a sector that's growing due to climbing demand in the energy sector. These products get some of the highest margins in the steel industry.
The Wall Street Journal story ("U.S. Steel to Buy Lone Star For About $2.1 Billion," 3/30/07) succinctly sums up the motivation. It is, "in part, a defensive move to compete against non-U.S. steelmakers and to grab assets while they are still available. Moreover, in beefing up, U.S. Steel adds a layer of protection from becoming an acquisition target itself, as has been rumored in recent weeks."
In another words, a case of eat or be eaten. Speculation was strong the U.S. steel would sell steel tube business or get acquired itself. Of course, the buyout of Lone Star doesn't really change anything.
Other steel tube makers in the US have been acquired in the last two years by foreign companies. Russian steel company Evraz Group bought Oregon Steel Mills earlier this year ($2,3 billion); Canada-based Ipsco Inc. acquired NS Group Inc. in 2006 ($1.5 billion), and Luxembourg-based Tenaris (the #1 steel tube company in the world) bought Maverick Tube in 2006 ($2.9 billion).
