Brazil-Based Gerdau Buys Remainder of Ameristeel Shares

By Basch, Mark | The Florida Times Union, June 7, 2010 | Go to article overview

Brazil-Based Gerdau Buys Remainder of Ameristeel Shares


Basch, Mark, The Florida Times Union


Byline: Mark Basch

After a couple of difficult years amid weak demand for steel, Gerdau Ameristeel Corp. rebounded with a profitable first quarter this year. But its stock didn't rebound with the earnings, remaining stuck near $7, well below its June 2008 high of $19.79.

So, many shareholders were probably happy last week when Gerdau S.A. offered to buy the remaining shares of Gerdau Ameristeel that it doesn't already own for $11 each. Brazil-based Gerdau S.A. owns about two-thirds of Gerdau Ameristeel's stock.

Gerdau Ameristeel is incorporated in Canada but headquartered in Tampa. Its stock trades on both the New York and Toronto stock exchanges. The company operates plants throughout the U.S. and Canada, including a steel mill in Baldwin and a rebar fabrication facility in Jacksonville.

Gerdau Ameristeel reported an adjusted net loss of $73.3 million in 2009 but recovered to post a $25.2 million profit in the first quarter of 2010, saying it saw better-than-expected demand for its products.

The two companies said Gerdau Ameristeel will get several benefits by becoming a wholly-owned subsidiary of Gerdau S.A., including more business development opportunities and a lower cost of funding.

"We believe this transaction represents an excellent opportunity for Gerdau Ameristeel's public shareholders to monetize their holdings at a price that represents full and fair value and is in the best interests of Gerdau S.A. and Gerdau Ameristeel, its public shareholders and other stakeholders," Gerdau S.A. Chairman Jorge Gerdau Johannpeter said in a news release.

TD Newcrest analyst Paul D'Amico said in a research note that Gerdau Ameristeel's stock price has been held back by Gerdau S.A.'s majority ownership, which limits the amount of shares available to the public. He thinks the $11 price is fair.

"Although there is potential for realizing somewhat higher value, we currently attach a low probability to such, and we do not see a potential increase over $11 a share to be material given the implied premium valuation. Essentially, it is arguable that an upper end takeout price of about $12 a share is supportable, but we are not willing to bet on it at this time," D'Amico wrote.

The stock did trade above $11 for much of last week, and as high as $11.23, after the Gerdau S.A. offer was announced.

PSS LOOKS FOR ACQUISITION

Analysts said there were no surprises at PSS World Medical's recent "Investor Day" presentation in Chicago. But they did say the Jacksonville-based company is looking at possible acquisition opportunities.

PSS distributes supplies to physicians and long-term care facilities, and the analysts said acquisitions are likely to be in those two areas.

"The company is not opposed to adding another 'leg' to its business, but such a move is not at the forefront because management believes significant opportunities remain in the current business," Ladenburg Thalman analyst Mickey Schleien said in his research note. …

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