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August 25, 2010
Share ThisBrazilian steel producer Gerdau S.A. (GGB) received shareholders’ approval to acquire the remaining 33.7% stake in Gerdau Ameristeel Corporation (GNA). A special resolution approving the US$1.6 billion cash transaction was passed. Pursuant to this approval, the transaction is expected to be completed this month, subject to the receipt of court approval and the satisfaction of other customary conditions.
Gerdau Ameristeel’s shareholders unanimously voted in favor of Gerdau S.A.’s stake acquisition in a special shareholders’ meeting. Roughly 93% of the common shareholders and 74% of the minority holders favored the transaction. Gerdau S.A. is presently the majority shareholder of Gerdau Ameristeel Corporation, with a 66.3% stake in the company.
The offer price of $11.00 per share represents a 53.4% premium to Gerdau Ameristeel’s closing price as of June 1.
The combined business will help Gerdau S.A. extend its global presence by bringing additional business development opportunities. Also, Gerdau S.A.’s credit worthiness will enable Gerdau Ameristeel to procure low-cost funds.
The outlook for the world steel market remains positive, with continued recovery expected in 2010. It is anticipated that the Brazilian market would also remain strong in 2010, with heavy demand from the manufacturing and construction industry.
Gerdau S.A. is the second largest steel producer in the world and the largest in the Americas. The company produces steel, mostly through mini-mills and distributes steel products through its own network of commercial Gerdau branches in Brazil. In the North American market, the company operates through its subsidiary, Gerdau Ameristeel. Gerdau S.A.’s North American facilities are based both in the U.S. and Canada.
Prime competitors of the company include Companhia Siderurgica Nacional (SID) and the privately held ArcelorMittal Brasil S.A. We currently maintain a Neutral recommendation on the stock, which is in line with the Zacks Rank of #3 (Hold) that it carries for the short term.
Read the full analyst report on "GGB"
Read the full analyst report on "GNA"
Read the full analyst report on "SID"
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