Nucor offers to buy Harris

More takeovers are expected in the steel industry.
CHARLOTTE, N.C. (AP) -- Steel products maker Nucor Corp. offered 1.07 billion in cash Tuesday for Canada's Harris Steel Group Inc., the latest in a string of acquisitions for the steelmaker and in the quickly consolidating industry.
"Basically, we have seen ongoing consolidation over the past several years, and really the expectations are to see that continuing as we go forward," said Nancy Gravatt, spokeswoman for the American Iron and Steel Institute, a Washington-based trade organization that represents more than 30 U.S. steel companies, including Charlotte, N.C.-based Nucor.
"Resulting is a smaller but healthier group of companies that are better to serve their customers' needs," she said.
Steel companies announced a spate of deals last year, highlighted by Arcelor SA accepting Mittal Steel Co.'s proposal to create a titan with nearly 10 percent of the global market.
The consolidation fervor helped overshadow concerns about weaker demand from the housing and auto sectors, as well as a potential inventory glut and falling prices.
But despite the declining prices for their products, steelmaker shares ended the year on a run as speculation of more consolidation in the globally fragmented industry continues to drive shares.
Nucor shares closed Friday at 54.66 on the New York Stock Exchange. The NYSE was closed Tuesday for the funeral of former President Gerald R. Ford.
No shock
The news didn't shock many analysts. Toronto-based Harris Steel disclosed last month that it had entered into third-party negotiations over a potential sale of the company.
"In general, it doesn't surprise me that a U.S. company is buying a Canadian company," said John Anton, director of steel service at Global Insight in Washington. "I think there will be more purchases. The Canadian mills are right for foreign ownership."
David S. Martin, a Deutsche Bank Securities analyst, maintained Nucor at a "hold" rating and in a note to investors wrote, "This transaction is 'in the mold' of Nucor transactions in the past, which should lead to incremental earnings and volume growth."
Nucor, which makes steel from recycled metal at its "minimill" operations across the United States, said the Harris Steel deal would broaden its geographic reach and give it opportunities to grow.
The move is the latest for Nucor, which has grown significantly since Daniel R. DiMicco became chief executive in 2000. Since then, the company has bought 16 plants and is looking at expansion and construction opportunities, most recently announcing plans to expand operations in Memphis, Tenn.
"We purchase when we think it makes sense to purchase. We expand and build at other times," said Hamilton Lott, an executive vice president for Nucor. "We continue to leave both options open."
Nucor is offering 46.25 Canadian dollars ( 39.69) for each Harris Steel share, a 6 percent premium over Harris' closing price of 43.49 Canadian dollars ( 37.32) Friday on the Toronto Stock Exchange.
The offer values Harris' stock at 1.25 billion Canadian dollars ( 1.07 billion), according to Nucor. Harris also had 123 million Canadian dollars ( 105.5 million) in debt at the end of September.

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