Gerdau Ameristeel to Buy Chaparral for $4.22 Billion

Gerdau Ameristeelagreed to acquire Chaparral Steelfor $4.22 billion, in a move to diversify its product offering into high value added steel products.

Gerdau will pay $86.00 per share in cash for shares of Chaparral , a premium of 13.6% to Chaparral's closing price of $75.69 on Tuesday on the New York Stock Exchange.

The deal has been unanimously approved by the boards of both Chaparral and Gerdau, the companies said in separate statements.

In April, Chaparral said its board was exploring strategic options, including a possible sale of the company, and that it had hired Goldman Sachs as an advisor.

Texas-based Chaparral is the second-largest producer of structural steel beams in North America and a major producer of steel bar products. It is also a recycling company.

"This strategic combination is an excellent fit for us and it broadens our product portfolio and gives us a full range of structural steel products," said Mario Longhi, Gerdau's chief executive, in a statement.

JPMorgan is acting as financial advisor to Gerdau and is providing the company with financing commitments of $4.6 billion to complete the transaction. Gerdau Ameristeel said it may issue additional equity after the deal closes.

Gerdau Ameristeel, which is 67% owned by Brazilian steelmaker Gerdau , is the second largest mini-mill steel producer in North America. The company also operates scrap recycling facilities and specialty processing centers.

Brazil's Gerdau, the majority stakeholder in Gerdau Ameristeel, is the largest long steel producer in the Americas. It has over 35,000 employees and operations in 13 countries.

Toronto-based Gerdau Ameristeel said the combination with Chaparral will generate annual pre-tax operating savings in excess of $55 million by the end of 2008.

The steelmaker expects the deal to be slightly dilutive to its 2007 and 2008 earnings per share, after considering expected savings and taking into effect the contemplated equity issuance.

The companies expect the deal to close by the end of 2007, subject to approval by Chaparral's shareholders and regulators.