Gerdau Ameristeel Corp.'s (GNA.T) largest minority shareholder won't support a takeover bid by the company's parent, Gerdau SA (GGB), unless the offer price is raised.

David Taylor, portfolio manager at Goodman & Co., which owns about 5% of the stock, told Dow Jones that he's been talking to other shareholders who are also unhappy with the bid and believes there's a chance the takeover could be blocked.

In a release early Friday, Gerdau Ameristeel said that as of Thursday, more than two thirds of the votes cast by all shareholders were in favor of the deal, with more than a majority of the votes cast by minority shareholders in favor. For the deal to proceed, it must be approved by at least two thirds of the votes cast by all shareholders and a simple majority of votes cast by minority shareholders.

A shareholder meeting originally scheduled for Tuesday has now been postponed in order to accomodate the regulatory review process, which Gerdau Ameristeel said won't be completed before Aug. 10. It will announce a new time, date and location when set.

In early June, Gerdau, Latin America's biggest steelmaker, announced a proposal to buy the shares of Gerdau Ameristeel it didn't already own for $11 a share. Gerdau, which owns about 66.3% of Ameristeel, made the bid to reduce costs and facilitate exports.

RBC, the independent adviser hired by Ameristeel's special committee, said fair market value of the stock is $11-$13 a share, according to an offer circular. The committee unanimously recommended that shareholders approve the offer.

Late last month, proxy advisory firms ISS and Glass Lewis issued reports saying shareholders should vote for the takeover.

However, Taylor has a couple of problems with the offer. For one thing, it's at the low end of RBC's range. "Even if you accept the valuation, why sell at the low end?"

In addition, he said RBC didn't account for "third-party synergies" in its valuation, meaning the cost savings that a company other than the parent would reap from a purchase of Gerdau. He said that, in other situations of a parent taking over a subsidiary, the value of another company's potential synergies was taken into consideration by the independent advisor. Taylor cited Royal Dutch Shell's (RDSA) takeover of Shell Canada and Magna International Inc.'s (MGA) takeover of Decoma as examples.

Taylor said he's not against selling the company, he just wants a fairer price, which in his opinion is $12.25, the price of its last equity issue in 2007.

Officials from Ameristeel weren't immediately available to comment on the Goodman remarks.

Ameristeel, formerly Co-Steel, is the second-largest mini-mill steel producer in North America. While the stock traded as high as $11.23 the day the offer was announced, it's traded just below the bid price since the end of June.

Company Web Site: http://www.gerdauameristeel.com

-By Andy Georgiades; Dow Jones Newswires; 416-306-2031; andy.georgiades@dowjones.com
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