Jul 11 2007
Gerdau Ameristeel Corporation announced today that it has signed a definitive merger agreement to acquire Chaparral Steel Company, for US$86.00 per share in cash. Chaparral Steel Company's Board of Directors has unanimously approved the transaction and will recommend to Chaparral Steel Company's shareholders that they vote in favor of the offer. The offer price values Chaparral Steel Company's equity at US$4.22 billion.
Chaparral is the second largest producer of structural steel products in North America and also a major producer of steel bar products. It operates two mini-mills, one located in Midlothian, Texas, and the other located in Dinwiddie County, Virginia. The company has approximately 1,400 employees and an annual installed capacity of 2.9 million metric tons.
Mario Longhi, GNA's President and CEO said, "The acquisition of Chaparral Steel Company is consistent with Gerdau Ameristeel's strategy to further diversify its product offering into high value added steel 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. As a premium steel asset, Chaparral brings not only high quality products and assets but also a strong organization with excellent technical capabilities."
Following the closing of the proposed transaction, Gerdau Ameristeel intends to explore the issuance of equity securities, with the goal of achieving a prudent level of capitalization and maintaining a strong balance sheet. The company's majority shareholder, Gerdau S.A., has committed to support Gerdau Ameristeel and will subscribe to any equity issuance in order to maintain its current level of equity ownership.
Gerdau Ameristeel expects that the combination with Chaparral Steel Company's operations will generate annual pre-tax operating synergies in excess of $55 million by the end of 2008. Gerdau Ameristeel expects that the transaction will be slightly dilutive to its 2007 and 2008 earnings per share after considering expected synergies and after taking into effect the contemplated equity issuance.
Andre Johannpeter, President and CEO of the Gerdau Group commented, "This transaction reaffirms our strategy to participate in the global steel consolidation. As we have indicated previously, Gerdau Ameristeel provides our platform for growth in North America. We have a history of successfully integrating businesses and capturing synergies through the implementation and execution of the Gerdau Business System."
The transaction is subject to the approval of Chaparral Steel Company's shareholders and other customary closing conditions, including regulatory approvals, and is expected to close before year end.
The proposed transaction has been unanimously approved by the Gerdau Ameristeel Board of Directors. J.P. Morgan Securities Inc. is acting as exclusive financial advisor to Gerdau Ameristeel and the Gerdau Group on this transaction and has provided financing commitments of $4.6 billion to Gerdau Ameristeel to complete the transaction. Simpson Thacher and Bartlett LLP and Torys LLP acted as legal advisors for the transaction.