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 sector.
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 officer, said.
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.