Gerdau Ameristeel Corp. (GNA) Shares Jump on Acquisition Offer from Majority Shareholder

Gerdau Ameristeel Corp. (GNA) Shares Jump on Acquisition Offer from Majority Shareholder

Shares of Gerdau Ameristeel Corporation (NYSE: GNA) jumped more than 50% in today�s trading. The stock reached a 52-week high of $11.23 in trading. At last check, it was up 54.53% to $11.08, with volume up from daily average of 1.65 million to 21.17 million. Florida-based Gerdau Ameristeel is a North American mini-mill steel producer. The company has annual manufacturing capacity of around 12 million tons of mill finished steel products.

The company today announced that Brazil-based Gerdau S.A. delivered a proposal to its board of directors to acquire all of its shares. Gerdau S.A. has proposed to acquire all of the Gerdau Ameristeel shares it does not already own for $11 per share in cash, valuing Gerdau Ameristeel�s minority held shares at $1.6 billion. Currently, Gerdau S.A. owns 66.3% in Gerdau Ameristeel. The deal will be finance through Gerdau S.A.�s existing cash resources and committed financing.

Gerdau Ameristeel�s board of directors has appointed a Special Committee of independent directors to oversee the preparation of formal valuation and finalization of a definitive agreement on the proposal. According to RBC Capital Markets, which has been retained by the Special Committee as an independent valuator, the value of the Gerdau Ameristeel stock is in the range of $11 and $13.

On acquiring Gerdau Ameristeel, both companies will benefit from additional business development opportunities. Also, on becoming a wholly-owned subsidiary of Gerdau S.A., Gerdau Ameristeel will enjoy lower cost of funding.

After considering the recommendation of the Special Committee, Gerdau Ameristeel�s board of directors has taken a decision to support the transaction proposed by Gerdau S.A. at a price of $11 per share.

The stock jumped on the news of the offer and is currently trading slightly above the price offered by Gerdau S.A. It is likely that investors are anticipating a further revision to the offer. The deal is subject to the finalization of definitive documentation for the transaction, which makes the stock an interesting merger play in the meantime.

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