Gerdau Ameristeel Corp., Tampa, Fla., has
agreed to acquire Chaparral Steel Co., Midlothian, Texas, in a
deal valued at $4.22 billion, or $86 per share, which would
expand its reach into the profitable structural steel
The definitive agreement was approved
unanimously by the boards of directors of both companies. The
deal is expected to close by the end of the year, although
Gerdau Ameristeel executives held out hope during a conference
call that they could get it done by the end of September.
The deal is subject to customary closing
conditions and regulatory approvals, but Gerdau Ameristeel
executives said they do not anticipate having to make any
divestitures to meet antitrust requirements.
Chaparral announced in April it was mulling
strategic alternatives, including a sale or merger, and
Ameristeel reportedly faced a lot of competition to close the
deal. "This was a very competitive process, and there were a
number of other players in the process as we understand it,"
Mario Longhi, Gerdau Ameristeel's president and chief executive
The acquisition will boost Gerdau
Ameristeel's annual production capacity to more than 10 million
tons but might slightly dilute 2007 and 2008 earnings per
share, the company said.
The deal will allow Gerdau Ameristeel to
diversify its product offerings in high-value-added steel,
Longhi said, including not only structural beams but also
microalloys, special bar quality and de-piling products. "This
strategic combination is an excellent fit for us and it
broadens our product portfolio and gives us a full range of
structural steel products," he said.
The $86-per-share offer for Chaparral
represented a 13.6-percent premium over the stock's closing
price the day before the deal was announced. A day later,
Chaparral's stock climbed 10.5 percent to $83.67 per share.