Essar buys Canada's Algoma for C$1.8 bln

New Delhi, Apr 16: Essar Global Ltd today said it will acquire the entire equity of Canada's Algoma Steel Inc at 56 Canadian dollar per share, aggregating to an all-cash deal of 1.8 Canadian billion dollars.

The take over will be done by the company's wholly-owned subsidiary Essar Steel Holdings Ltd.

''We believe Algoma is an excellent addition to our existing steel business and offers growth potential. This acquisition fits in with our global steel vision of having world class low cost assets, with a global footprint. Algoma provides us with an excellent platform for the Canadian and North American markets,'' Essar Global Chairman Shashi Ruia said.

Algoma Steel, based in Sault Ste Marie, Ontario, reported steel shipments of 2.4 million tonnes and revenues worth 1.9 billion Canadian dollars in 2006.

The offer price is at premium of 48 per cent to Algoma's volume weighted average stock price for the 20-day period ending on February 14, 2007.

As per the terms of the agreement, Algoma will undertake a court-approved plan of arrangement. The arrangement has to be approved by the Canadian company's shareholders with at least two-thirds majority. It is also subject to closing conditions, including necessary regulatory approvals.

The support agreement provides for payments to Essar in the event that the acquisition is not completed under certain circumstances.

The overseas steelmaker's board has unanimously agreed to the transaction, while the shareholders meeting is scheduled to be held in June.

The acquisition will be completed shortly thereafter if approved by the shareholders, an Essar statement said.

''The board of directors unanimously supports the Essar proposal as it reflects a significant premium to the historical share price of Algoma. This transaction will also benefit Algoma's employees as it will result in new ownership that is committed to investment in Algoma's facilities to support growth and business sustainability,'' Algoma Chairman Benjamin Duster said.

Genuity Capital Markets, which is acting as financial advisor to Algoma, has delivered an opinion to its board that the consideration is fair from financial point of view.

UBS Investment Bank is acting as exclusive financial advisor to Essar and sole arranger of transaction financing.

Stikeman Elliott LLP is acting as legal counsel to Essar, and Torys LLP as legal counsel to Algoma Steel.

UNI