Nucor to buy Canadian steel maker for $1.07 billion

TORONTO: Nucor, the second- largest U.S. steel producer, agreed on Tuesday to acquire Harris Steel Group for $1.07 billion to increase output of products used to strengthen concrete.

Nucor agreed to pay 46.25 Canadian dollars, or $39.68, for each Harris Steel share, or 6.3 percent above the closing price on Friday. The transaction was approved by the Harris family, which owns more than half of Harris Steel, Nucor said in a statement.

Nucor, based in Charlotte, North Carolina, is second only to U.S. Steel in the American market.

Surging demand for steel spurred a record $78 billion of mergers and acquisitions last year in the industry, including the $38.3 billion takeover of Arcelor by Mittal Steel.

Nucor had record earnings in 2006. Its chief executive, Daniel DiMicco, wants to increase profit from products like rebar and wire mesh as the U.S. market for steel sheet, the main raw material, is eroded by cheap imports.

"It was time for Nucor to branch out from steel making," said Scott Burns, a steel analyst at Morningstar in Chicago.

Shares of Harris Steel rose 2.56 dollars, or 5.9 percent, to 46.05 dollars in afternoon trading on the Toronto Stock Exchange. The stock had gained 14 percent since the company disclosed Dec. 7 that it was negotiating with a possible buyer.

Nucor wants to expand production of steel rebar, which is used to reinforce concrete in structures like bridges and housing. Sales at Harris's reinforcing-products unit nearly doubled in the past two years, from 337 million dollars in 2003 to 661.73 million dollars in 2005. Harris is the biggest maker of rebar in Canada.

Nucor also is seeking geographic diversity, Burns said. The company, which is building or expanding plants in Tennessee and Alabama, produces mostly in the U.S. South, while Harris, which is based in North York, Ontario, makes about half its sales to customers in the northern part of the United States, he said.

The transaction would be the biggest ever for Nucor, which has been using some of its surplus cash to pay special dividends to shareholders. The company, active in 17 states, already planned to build three new plants capable of producing 850,000 tons of carbon and alloy sheets a year for the car and heavy-equipment markets.

Nucor makes most of its steel from recycled metal. Its rivals, Mittal and U.S. Steel, use a mixture of scrap and raw materials like iron ore and coking coal. Nucor makes steel using electric arc furnaces, known as mini-mills, which are less energy-intensive than traditional blast furnaces and allow the company to regulate output more easily than companies that have only blast furnaces.

Steel companies are merging to increase their influence over customers and suppliers and to become more profitable as steel demand rises, especially in Asia.

Harris Steel's products include reinforced steel bar, grating and wire mesh for the construction industry as well as metal products for the automotive, mining and industrial industries.

The company's third-quarter profit rose to a record 95 Canadian cents a share, up from 55 cents a year earlier. The reinforced steel bar business accounted for about 54 percent of total sales in the period, the company said.

Dale Crofts reported from Chicago.