Yet another steel deal
Add one more to the count of major steel acquisitions, Add also one more buyout of a Western company by an Indian firm. According to a New York Times story ("India Is Reveling in Being the Buyer", 2/6/2007) "the value of overseas bids by Indian companies soaring to $21 billion last year from less than $1 billion in 2000."
Essar Global, based in India, announced it would buy Canada-based Algoma Steel for $1.6 billion. This is according to the Financial Times ("Essar Global agrees C$1.85bn Algoma deal", 4/18/07) the second largest ever acquisition by an Indian company in North America.
The idea, according to the article, is to give Essar, a low-cost producer, a vehicle for selling its steel in North America. That's the strategy, it points out, being followed by India's Tata Steel in buying Anglo-Dutch Corus recently.
The Economic Times (India) puts it this way ( "Essar's Algoma buy sets global acquisition drive rolling," 4/27/07): "The acquisition follows a trend, started by Mittal Steel, where more profitable steel companies gobble up those with lower profitability."
Algoma's current client list includes General Motors and Ford, both fading, but still major buyers of steel. Most of its production is in hot-rolled steel, used, among other things, for building cars. Algoma had been in negotiations with Salzgitter AG, Germany's #2 steelmaker, but those broke down. Algoma had reorganized in recent years after bankruptcy.
Last year, there were almost $100 billion in steel takeover deals, including one of Dofasco, Canada's #1 steelmaker. That company was bought by Arcelor, which was later bought by Mittal Steel. Essar bid unsuccessfully for Egypt's Suez Steel last year, and had gone into a joint venture with Vietnamese steelmakers.
Already rumors are flying that Stelco, the last remaining Canada independent steel company, will be snapped up soon, another company coming out of bankruptcy.
8:11:04 PM 
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