Germany’s ThyssenKrupp AG said Tuesday it raised its bid for the Canadian steelmaker Dofasco Inc. to $4.2 billion, matching the latest competing offer from steel rival Arcelor SA.
Both bidders are now offering 63 Canadian dollars ($54.23) per share, or a total of 4.88 billion Canadian dollars ($4.2 billion), in cash for Dofasco, which is a major supplier to U.S. automakers.
Dofasco reiterated its support for the German company’s latest bid on Tuesday.
“The special committee of Dofasco’s board of directors is continuing to support the ThyssenKrupp offer in its recommendation to Dofasco shareholders primarily on the basis that it is less conditional than the Arcelor offer, while offering the same cash price to shareholders,” said Dofasco Chairman Brian MacNeill.
Luxembourg-based Arcelor had no immediate comment.
On Dec. 23, Arcelor raised its offer for Dofasco to 63 Canadian dollars from its initial offer of 56 Canadian dollars last year.
Duesseldorf-based ThyssenKrupp later trumped that offer with a cash bid of 61.50 Canadian dollars a share, more than 9.8 percent above Arcelor’s first hostile offer for Dofasco.
Arcelor is the world’s second largest steelmaker by output behind Mittal Steel Co., which is listed in the Netherlands and New York. ThyssenKrupp is the world’s ninth largest steel producer.
“ThyssenKrupp’s decision to increase its offer reflects the quality and strategic value of Dofasco,” said ThyssenKrupp Chief Executive Ekkehard Schulz. “We will continue to pursue the acquisition of Dofasco, recognizing the significant growth opportunities for our combined North American steel operations.”
Shares of ThyssenKrupp were up 2.8 percent to 18.44 ($21.85) in Frankfurt trading.
“Thyssen is showing Arcelor its teeth and makes clear it won’t give up on Dofasco that easily,” Landesbank Rheinland-Pfalz analyst Thomas Hofmann said. “However, whether this strategy to move in small steps is the most clever strategy remains to be seen,” he added.
Arcelor, which has suffered several setbacks in its expansion attempts in 2005, has said it sees Dofasco as the basis for further expansion in North America. It made the hostile offer after failing to reach terms with Dofasco’s management in several friendly approaches this year.
Acquiring Dofasco would give Arcelor its first major foothold in North America, and the takeover would boost its global market share from 14-15 percent to between 17 and 18 percent, he said.
Almost two-thirds of Arcelor’s sales are to high-end European automotive and packaging companies. Until now, the company has missed out on the key North American market, which sells one-third of the world’s cars.
Hamilton, Ontario-based Dofasco has facilities in Canada, the U.S. 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 for cars. However, U.S. automakers Ford Motor Co. and General Motors Corp. posted huge third-quarter losses and are scaling back production.
Arcelor had revenue of 30 billion euros last year, but is facing tougher conditions in its core European markets.
Mittal Steel overtook Arcelor as the world’s largest steelmaker by buying U.S.-based International Steel Group, and trumped Arcelor to acquire Ukraine’s state-owned Kryvorizhstal in a public auction last month. Arcelor also pulled out of a bid for Turkey’s Eregli Iron and Steel Works Co., know as Erdemir, earlier this year.
Arcelor was created in 2002 through the merger of Usinor SA of France, Arbed SA of Luxembourg and Aceralia Corp. Siderurgica SA of Spain.