Yesterday, IPSCO (IPS) reached an agreement to buy NS Group (NSS) for $66.00 per share in cash, a 43% premium to Friday’s closing price of NSS and a 33% premium to its 90-day average closing price. This takeover of a large U.S. oilfield tubular manufacturing company comes three months after the announcement of a similar transaction in which Tenaris (TS) agreed to pay $65.00 a share in cash for Maverick Tube (MVK), a premium of 42% to Maverick’s closing share price on the previous day and a premium of 24% to its 90-day average trading price.
In two acquisitions, two international steel companies (IPSCO and Tenaris) have agreed to pay a total of $4.2 billion for the equity of two U.S.-based oilfield steel manufacturers. Based on yesterday’s closing price, Lone Star’s equity is valued at only $1.3 billion net of its cash reserves.
Gasoline margins have been pressured by two factors: an unseasonal inventory build of 1.5 million barrels in the last 3 weeks, compared to an average draw of 5.7 million barrels in the same time period in the past 5 years, and the psychological milestone of the Labor Day Weekend, which marks the end of the summer driving season.
Gasoline prices have declined 38.1 cents per gallon, or 18% in the past three weeks. Distillate margins remain strong, however. This could be attributable, in part, to the impending implementation of the ultra-low sulfur diesel fuel regs through the distribution chain in the next 4-5 weeks. In addition, we believe actual margin realizations on distillate production for some refiners will exceed our proxy distillate margins, reflecting premium prices for diesel fuel over heating oil.