Steel pipe and tubing maker Lakeside Steel Inc. says it has received a $77.5-million takeover bid from an unnamed buyer, more than four times its market price before the offer was made.
The Welland, Ont.-based company said Tuesday it has a non-binding letter of intent from the prospective buyer, but the deal won't be finalized until the unnamed company finishes its due diligence on Lakeside, which has to be completed by Jan. 9.
Trading in Lakeside shares had been halted for several days and on resumption they rocketed up more than 300 per cent, gaining 23 cents to 30 cents on the TSX Venture Exchange — though remaining well below the price of the 40 cent per share offer.
Lakeside makes steel pipes and tubing used in the oil and gas industry. It has factories in Welland, Texas and Alabama.
If the prospective purchaser is not Canadian, and the deal goes through, it will continue a years-long trend that has seen virtually all major Canadian steel companies swept up by foreign firms: Hamilton-based Stelco Inc. was bought by U.S. Steel in 2007, Dofasco was purchased by ArcelorMittal in 2006, Algoma Steel Inc. was purchased by India's Essar Group in 2007 and SSAB Swedish Steel AB bought Ipsco in 2008.
Due to the emergence of the bid, Lakeside says it will cancel both a loan and an associated private placement of its stock announced last month.
Lakeside has struggled in recent months, in November posting a $7.6-million second-quarter loss – reversing a $1.2-million profit in the year-earlier period – as it suffered from low margins due to numerous factors, including foreign imports and higher costs. Revenue was down 28.1 per cent to $47.8-million.
The company, which counts the U.S. oil and gas industry as a major customer, has been expanding in the southern United States to bring down its costs and deal with the impact of volatility in the value of the two countries' dollars.
Lakeside had also previously expressed some interest in buying some of U.S. Steel's former Stelco assets in Hamilton, if the U.S. firm had been forced to sell them by a lawsuit launched by the federal government.
Ottawa alleged that U.S. Steel broke promises it made to keep jobs and maintain production levels when it bought Stelco in 2007.
The two sides settled the matter earlier this month, with U.S. Steel Corp. promising to keep making steel in Canada for at least another four years and to make major capital investments at its Canadian mills.