United States Steel Corporation announced yesterday it has entered a definitive agreement with Lone Star Technologies, to acquire it for $67.50 per share (total $2.1 billion) in cash. The boards of both companies approved unanimously. The deal is expected to close in Q2 or Q3 this year, pending shareholder and regulatory approval. U.S. Steel says the deal will be accretive to '07 EPS, with $100-plus million in annual pre-tax operating synergies by the end of next year. The $67.50/share represents a 39% premium to Lone Star's $48.45 close on Wednesday. The Wall Street Journal notes U.S. Steel will become the largest producer of tubular steel in N. America and will have broader offerings to oil and natural gas drillers. A metals analyst with Bradford Research is quoted saying some thought U.S. Steel would sell its tubular business, but now with the Lone Star deal, U.S. Steel itself becomes tougher to acquire, in light of the industry's recent wave of global consolidation. U.S. Steel's shares rose 3.7% to $101.22 yesterday, establishing a new all-time high. Lone Star jumped 36.5% to $66.11, also an all-time high.
Sources: Press release, The Wall Street Journal
Commentary: Jim Cramer's Take on United States Steel • U.S. Steel Q4 Profit Beats Street on Higher U.S. Prices, EU Demand • Lone Star Technologies is More than a Pipe Dream [Sept. '06]
Stocks/ETFs to watch: United States Steel (X), Lone Star Technologies (LSS). Competitors: Mittal Steel (MT), Nucor (NUE), AK Steel Holding (AKS). ETFs: Market Vectors - Steel (SLX), SPDR Metals and Mining (XME)
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