updated 1/24/2006 8:08:21 AM ET 2006-01-24T13:08:21

Steel giant Arcelor SA said Tuesday it had signed an agreement to buy Canadian automotive-steel producer Dofasco Inc. for $4.85 billion after German rival ThyssenKrupp dropped out of the bidding war.

“Dofasco’s board of directors has resolved to unanimously recommend to Dofasco shareholders that they accept Arcelor’s offer,” the companies said in a joint statement.

ThyssenKrupp refused to match Luxembourg-based Arcelor’s offer of 71 Canadian ($61.77) dollars a share, saying anything more than 68 Canadian dollars ($59.16) per share would go beyond the point of creating economic value.

Arcelor raised its hostile takeover bid a second time on Jan. 16 after failing to agree on terms with the company’s management last year — dismaying analysts who feared the world’s second-largest steelmaker was paying too high a premium in its determination to win a foothold in the North American market.

Hamilton, Ontario-based Dofasco has facilities in Canada, the United States and Mexico. It makes various steel products, but mainly sells to U.S. automakers, producing around 5.5 million tons a year of flat steel usually used by U.S. carmakers.

Arcelor said the acquisition would boost its global market share from 14-15 percent to 17-18 percent and raise its annual production by around 10 percent to 55 million tons.

The Dofasco deal comes after Mittal Steel Co. overtook Arcelor as the world’s largest steelmaker by buying U.S.-based International Steel Group, snapping up steel mills in Eastern Europe and paying about $4.8 billion to acquire Ukraine’s state-owned Kryvorizhstal in an October public auction.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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