Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Fully integrated Canadian steel producer, Algoma Steel, will move from being a privately held company to becoming a publicly listed one after reaching a definitive merger agreement with the special purpose acquisition company, Legato.

 

The transaction will allow Algoma more flexibility with strategic plans and business investments including the capability to invest in electric arc furnace (EAF) steelmaking, which would boost earnings and lower the company’s carbon footprint by about 70pc, Algoma stated in a media statement on May 24.

 

The operation is scheduled to close during Q3 2021. The recent undertaking follows the company’s prior revelation in February of its 2.1mn mt No 2-ladle metallurgy furnace installation. 

 

The Sault Ste. Marie, Ontario-based steel maker produces hot and cold rolled steel including sheet and plate and holds a raw steel production capacity of approximately 2.8mn mt per year. 

 

The all-stock deal involves a pro forma enterprise value of around $1.3bn at closing and around $1.7bn adding in contingent consideration. Several investors have agreed to contribute to the transaction through private investment in public equity (PIPE) of $100mn at $10 per share along with about $236mn held in Legato’s trust account.

 

After the transaction is complete, Algoma’s current shareholders and management team will hold nearly 74pc of the combined company’s remaining common shares, PIPE investors will hold about 7pc and Legato’s stockholders will hold approximately 19pc.

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