Dofasco rejected 4 Arcelor-Nucor bids
Takeover target Dofasco Inc. has revealed U. S. steel giant Nucor Corp. teamed up with Luxembourg’s Arcelor to make four separate offers for the company this year.
In recommending shareholders accept a much higher bid from German- based ThyssenKrupp, Dofasco’s board disclosed yesterday Nucor’s and Arcelor’s two top executives approached the company with an opening offer of $43 a share in May and bumped it to $55 last month.
However, Nucor, the biggest steel producer in the U. S., abruptly dropped out of the joint pursuit within a day of the last overture and Arcelor made a hostile bid of $56 a share or $ 4.3 billion for Dofasco Nov. 23.
Dofasco also disclosed that it had talked to ThyssenKrupp about its interest a week before Arcelor’s bid. It culminated with an offer of $ 61.50 a share or $ 4.8 billion on Nov. 28.
Dofasco’s board said it is recommending the offer because it represents a 40 per cent premium to the stock’s trading price the day before Arcelor made its play. The board also noted in the circular that it canvassed other potential bidders and considered an auction. Shareholders and some analysts had raised concerns that Dofasco’s board had
not sought out the best bid.
Arcelor and Nucor officials could not be reached for comment yesterday on why they did not make a joint public bid after the private proposals. The partnership also raised some questions at Dofasco about whether it would eventually break up Dofasco assets. The Dofasco circular reveals some of the behind- the- scenes manoeuvring in the takeover of Canada’s biggest steel maker, which will likely fall under foreign control for the first time in its 93- year history.
It started when chief executive officers Guy Dolle of Arcelor and Dan DiMicco of Nucor proposed a share price of $43 for all of the stock in a May 27 meeting with Dofasco chief Don Pether and other company officials. A special Dofasco board committee and the company’s advisers called the offer “ inadequate” and declined a request from the suitors for a look at the books.
Dofasco had acquired 65.8 per cent of the shares of Quebec Cartier Mining that it didn’t already own. The steel maker was considering monetizing the investment through a public offering that would increase Dofasco’s value.
In mid- June, Pether and other executives visited ThyssenKrupp in a previously scheduled event to discuss potential joint ventures. Ekkehard Schulz, ThyssenKrupp’s executive board chairman, indicated his company might consider an offer for Dofasco if there was an unsolicited bid, according to the circular. The circular disclosed Pether responded by saying Dofasco was confident in its strategy and prospects, and the company was not marketing itself.
Dolle and DiMicco wrote Pether on June 21 with a proposal for $46 a share plus a security that would provide shareholders with a right to receive the value of Quebec Cartier Mining if Dofasco monetized it.
Dofasco’s board unanimously rejected the proposal days later.
In July, Dolle phoned Pether and advised him Arcelor and Nucor felt the price was fair and they would not increase it. But they came back. Dolle and DiMicco wrote Dofasco chairman Brian MacNeill on Nov. 10 with a cash offer of $52 a share that would increase to $55 if Arcelor and Nucor could see the company’s books. The circular said they also requested Dofasco not monetize Quebec Cartier Mining but the firm proceeded with the plan. A day later, Dolle and DiMicco increased the pressure by telling Pether and MacNeill that they would take the offer directly to shareholders if the two sides could not reach a deal. The circular said the board considered at a meeting a few days later the pros and cons of a deal with a single bidder if the offer was likely higher than what directors could expect from any other suitor. The board expressed concern about entering into a deal without knowing if there were other alternatives, the circular said.
It also concluded ThyssenKrupp would be a leading potential bidder in view of joint ventures with Dofasco, Schulz’s comment to Pether and the strategic benefit of the German steel maker gaining a foothold in North America.
Dofasco told Dolle and DiMicco on Nov. 16 that their companies’ bid of $55 did not value Quebec Cartier Mining properly.
Dolle and DiMicco revised their companies’ bid the same day by offering either the June or November proposal. But Dofasco rejected the idea a day later, the circular said.
Pether had already contacted Schulz of ThyssenKrupp about an unsolicited bid. Schulz indicated his company had an interest in bidding and it would send a team here Nov. 18.
Schulz made a proposal on Nov. 21 that ThyssenKrupp would offer a higher price than the other bidders. The circular does not indicate the price but Dofasco’s board said it wasn’t enough to justify exclusive talks. On the same day, Dolle and DiMicco returned with a “ final offer” of $50 plus a distribution of 65.8 per cent of Quebec Cartier’s securities minus taxes to Dofasco and other conditions, the circular said.
Dofasco’s advisers described the unidentified ThyssenKrupp offer as superior although it still didn’t justify exclusivity. Furthermore, the break fee was too high, the firm said.
Arcelor without Nucor then publicly announced its takeover bid of $56 a share early Nov. 23. Dofasco said it would review the offer and look at alternatives and advised shareholders not to tender their stock. The circular said after Arcelor’s bid, ThyssenKrupp sent a letter the same day proposing a higher price that was better than its own initial offer plus a lower break fee. On the same day, Dofasco’s board discussed the merits of a full auction. The firm contacted other steel companies but none indicated a strong desire to negotiate, the circular added.
Dofasco’s financial advisers pressed ThyssenKrupp for a pre- emptive price and a lower break fee. By the end of the day, ThyssenKrupp had informed Dofasco it would raise the offer to $ 61.50 a share or $ 4.8 billion, the circular said. ThyssenKrupp completed its due diligence Nov. 26 and Dofasco’s board approved the bid and recommended it to shareholders the next day. ThyssenKrupp’s supervisory board approved it Nov. 28 and the two firms announced it that day.