North American steel - the feeding frenzy continues
Swedish steel company SSAB announced that it would buy Canada-based Ipsco Steel. The deal if or $7.7 billion. And of course, such an announcement is just the first bid in an auction. It is anticipated that there will be another bidder, Russia's Evraz Steel to contest the buyout.
The move follows US Steel's acquisition of US-based Lone Star Technologies, a maker of steel pipe for the oil industry and a major competitor of Ipsco, a move that made US Steel #1 in North America in steel pipe. Evraz Group bought Oregon Steel Mills, also a steel tube maker. In 2006, Luxembourg-based Tenaris (the #1 steel tube company in the world) bought US-based Maverick Tube.
In addition, India-based Essar Steel bought two US-based steel companies last month , namely Minnesota Steel Industries $1.7 billion), with its major iron ore reserves, and Canada's Algoma Steel ($1.6 billion).
SSAB, a highly profitable steel company, specializes in high-quality plate steel, as used for armor plating on military vehicles and for critical parts of heavy-duty machines like bulldozer blades and cranes. The buyout would be SSAB's first move outside Scandinavia.
According to a Wall Street Journal story ("SSAB's Acquisition of Ipsco Signals
Vulnerability of U.S. Steel Companies", 5/4/07) [SSAB'a CEO] "said he knew his company had to get bigger in order to compete against larger companies such as China's Shanghai Baosteel Group Corp., Germany's ThyssenKrupp AG and Mittal Steel Co., which also are in the plate and tube market."
Ipsco also makes high-quality plate steel, as well as being the #2 North American producer of steel pipe, especially for the petroleum industry. In 1006 Ipsco Inc. it acquired US-based NS Group Inc, another steel pipe maker.
Evraz is Russia's #1 steel company, with increasing operations abroad. In 2005 it acquired Czech steel company Vitkovice and Italian steel maker Palini e Bertoli.
It illustrates several points we've hit on:
- a buying panic in the international steel industry, which is continued at a rate almost comparable to last year's, which included the merger of #1 Mittal and #2 Arcelor.
- yet another purchase of a smaller US steel company
- the strength of European currencies, making US companies good buys.
- the high value of companies serving the oil industry.
