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Ruukki and SSAB to become welded together
Posted on Wednesday, 22 January 2014 10:53
Swedish steelmaker SSAB has announced it will buy Finnish rival Rautaruukki (Ruukki) in an all-stock deal worth SEK 10.10 billion (USD 1.56 billion), in an effort to sharpen its competitive edge in a weak global market.
The Stockholm-based acquiror will offer a combination of class A and B shares, on the basis of 0.48 of the former and 1.21 of the latter, which represents a premium of 20.0 per cent for Rukki stockholders.
SSAB expects to make savings of around SEK 1.40 billion, equivalent to SEK 2.00 per share, within three years of completion for a one-off cash outlay of roughly SEK 350.00 million.
These are likely to be achieved through improvements to production, a more efficient supply chain and administration process and maximising purchasing systems.
Swedish investment company Industrivärden, which holds 23.4 per cent of the votes and 18.2 per cent of the capital of SSAB, and Finnish sovereign wealth fund Solidium, owner of 39.7 per cent of shares in Rukki, have given their support to the transaction.
Industrivärden said it intends to remain a stockholder of the combined group with a 10.5 per cent interest.
Following completion, likely to be in late April or early May, the merged companies will have net debt of SEK 21.90 billion and net gearing of 59.0 per cent as at 30th September 2013.
The group will have steel production facilities in Sweden, Finland and the US with combined annual production capacity of 8.80 million tonnes.
SSAB said the proposed transaction is a natural step to strengthen competitiveness in the European segment of steel operations by improving costs through the identified savings and increasing production flexibility to adapt to changes in market demand.
Solidium managing director Kari Jarvinen told Reuters the deal makes sound strategic and financial sense, coming as it does against a backdrop of significant overcapacity in the European carbon steel market.
He noted small players like SSAB and Rukkii can become more competitive by focusing their resources on making high-quality products.
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