Corus left shoulder or the foothills?

I don't really understand Arcelor's scattergun logic - they are buying up low grade "cooking" steel producers like it's going out of fashion (2 in Costa Rica yesterday) but seem determined to uprate their offering to North America almost regardless of price.

Oh well, suppose it can only help all steel company share prices medium term?

Arcelor Increases Dofasco Bid, Topping ThyssenKrupp's (Update3)

Dec. 23 (Bloomberg) -- Arcelor SA, the world's second- largest steelmaker, increased a hostile bid for Canada's Dofasco Inc. to C$4.9 billion ($4.2 billion), topping an offer by ThyssenKrupp AG.

Arcelor will pay C$63 a share, it said on its Web site today, 2.4 percent more than ThyssenKrupp's Nov. 28 bid of C$4.8 billion, or C$61.50 a share. Dofasco shares were at C$63.90 at the close of trade in Toronto yesterday.

Steelmakers such as Luxembourg-based Arcelor and Dusseldorf-based ThyssenKrupp want to expand to increase their bargaining power with suppliers of iron ore, which has gained in price this year. Hamilton, Ontario-based Dofasco makes 10 percent of the steel for the North American auto market and produces more iron ore than it needs.

``Arcelor feel they can squeeze more out of it and so are prepared to pay a higher price,'' said Stephen Pope, head of equity research in London at Cantor Fitzgerald LP. ``Arcelor has very little room to grow anymore in the North European sphere, and Dofasco has iron-ore assets.''

Arcelor also wants to buy Dofasco, founded in 1912, to ensure ThyssenKrupp doesn't get hold of the technology at DoSol Galva Limited Partnership. The Ontario-based joint venture with Dofasco makes high-quality galvanized steel for auto bodies.

``There is the value of intellectual capital,'' Pope said. Arcelor ``believes it is worthwhile to pay up to protect that.''

Shares Decline

Shares of Arcelor, which have gained 24 percent this year, fell 14 cents, or 0.7 percent, to 20.83 euros ($24.74) as of 9.05 a.m. in Paris today. ThyssenKrupp dropped 13 cents, or 0.7 percent, to 17.32 euros as of 9:05 a.m. in Frankfurt.

``Expansion into North America is a key strategic objective for Arcelor,'' Guy Dolle, Chief Executive Officer of the company, said in the statement today. ``As a partner of the Arcelor group, Dofasco will become a stronger, more competitive steel producer on the North American steel market.''

Buying Dofasco, which supplies Michigan-based Ford Motor Co. with steel for vehicles, would increase Arcelor's slice of North America's automotive steel market to 12 percent from about 1 percent now. In Europe, Arcelor supplies steel to one of every two cars.

Arcelor would have to pay ThyssenKrupp C$100 million as breakup fee. The Luxembourg company said the offer, which is all cash, will be valid for 35 days. UBS AG and Merrill Lynch & Co. are advising Arcelor on the transaction.

ThyssenKrupp Undecided

ThyssenKrupp said it hasn't decided its next move.

The company ``will review the bid and decide how it intends to proceed,'' spokesman Christian Koenig said by telephone from Dusseldorf today. ``The executive board has taken note of Arcelor's bid.'' He declined to give a timeframe.

Iron-ore prices, which soared 71.5 percent to an all-time high this year on surging Chinese demand, cut into profit at Arcelor and other steelmakers. Prices for iron ore, a raw material in steelmaking, are expected to gain 12 percent in the year starting April 1, according to the median estimate of 10 analysts and money managers in a Bloomberg survey.

Brazil's Cia. Vale do Rio Doce, Rio Tinto Group and BHP Billiton, the top three iron-ore producers, control 75 percent of the market. By comparison, the top five steelmakers have 25 percent share of the market.

The dominant position of the iron-ore producers makes for a ``lopsided bargaining table,'' Pope said.

Through a stake in Wabush Mines in Labrador and its ownership of Quebec Cartier Mining Co. in Quebec, Dofasco gets about 3 million tons more iron ore than it requires for making steel each year.

Missed Out

Toyota Motor Corp. plans to build a new plant in Woodstock, less than 50 miles away from Dofasco's steelworks in Hamilton, on the shore of Lake Ontario.

Dofasco would ``fulfill Arcelor's stated strategy'' of expanding in North America and allow it a share of the oil-pipe market, a team of CSFB analysts led by London-based Michael Shillaker wrote in a Dec. 6 note. Demand for pipes is ``likely to continue booming for some time,'' CSFB said.

Arcelor has missed out on acquisitions this year, losing to larger competitor Mittal Steel Co. in an auction for Ukraine's Kryvorizhstal on Oct. 24 and failing to buy Turkey's Erdemir in an auction won Oct. 4 by Ordu Yardimlasma Kurumu, a local pension fund.

Arcelor first bid for Dofasco on Nov. 22, in a joint offer with Charlotte, North Carolina-based Nucor Corp., the second- biggest U.S. steelmaker. A day later, the Luxembourg company announced a hostile C$56 per-share offer for the Canadian steelmaker. On Nov. 28, ThyssenKrupp offered C$61.50 a share after Dofasco's board asked it to top Arcelor's bid.