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Bullboard - Stock Discussion Forum Lakeside Steel Inc V.LS

TSXV:LS - Post Discussion

Lakeside Steel Inc > good read
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Post by stubbs on Dec 22, 2011 4:27pm

good read

too many 2nd shooter people out there. Do you really think its a bluff bid...I dont think so!. however doesnt mean it wont be completed. this is a good article and I would say Vic has played his cards by his comments.

Lakeside Steel gets $77.5-million takeover

Offer from unnamed buyer

Welland-based steel pipe and tubing maker Lakeside Steel Inc. says it has received a $77.5-million takeover bid from an unnamed buyer.
LAKESIDE STEEL Welland-based steel pipe and tubing maker Lakeside Steel Inc. says it has received a $77.5-million takeover bid from an unnamed buyer.
Hamilton Spectator file photo

WELLAND The company that wanted to swallow the former Stelco is being swallowed itself.

Welland-based Lakeside Steel Inc., one of the last publicly traded steel companies in Canada, announced Tuesday it has signed a non-binding letter of intent to sell itself to an unnamed buyer for $77.5 million.

The offer of 40 cents a share is almost six times the stock’s price before the offer. News of the proposal sent the shares soaring 300 per cent on the Toronto Stock Exchange to 30 cents from seven. The issue ended the day up 279 per cent to 26.5 cents.

Lakeside chairman and chief executive Vic Alboini, a Bay Street investor and Hamilton native whose company also holds a minority stake in smartphone maker Research in Motion Ltd., said the sale of money-losing Lakeside is best for shareholders and the company’s nearly 400 employees.

“For the shareholders, it is a premium to where the share price has been trading,” Alboini said in an interview from Florida.

“For the employees and the customers and suppliers and the people we deal with, it provides a bigger group that would acquire Lakeside and drive it to the next level.”

Last month, Lakeside reached a new labour contract covering about 350 workers represented by the Canadian Auto Workers’ union that will run until Oct. 31, 2014.

Doug Orr, a CAW national staff representative, said the proposed deal raises concerns for workers.

“We don’t know what their plans are if it is sold, but it is a highly productive plant ... so hopefully, there is a plan for the future if a sale does go through,” he said.

“The members’ concern right now is the unknown.”

Trading in the shares had been halted for several days before the announcement on the deal.

In its news release, the company said the proposed offer is subject to conditions including completion of due diligence by Jan. 9 and the commitment of large shareholders to support the sale.

Lakeside has agreed not to solicit or respond to any other offers until Jan. 9.

Alboini wouldn’t identify the potential buyer other than to say it was a strategic purchaser.

That suggests it’s another steelmaker or a company wanting to expand in Lakeside’s key market — the growing U.S. shale natural gas industry.

Alboini said Lakeside was approached by the unnamed buyer after the Canadian steelmaker announced a financing deal last month.

“When that news appeared, we had several parties that approached us expressing interest in Lakeside and we decided to enter into a letter of intent with one of them,” he said.

Jaguar Financial, a merchant bank headed by Alboini, is the largest shareholder in Lakeside with a nearly 9 per cent stake, while Alboini personally holds more than 3 per cent of the company.

Formed from the former Stelco’s tube business, Lakeside became a local sensation when it gained intervener status in the lawsuit launched against U.S. Steel by the federal government. The government was seeking financial penalties against U.S. Steel for breaking production and employment promises it gave in exchange for approval to buy Stelco. Lakeside sought a forced sale of the Stelco plants in Hamilton and Nanticoke.

Those dreams died recently when the Harper government announced it was dropping its suit in exchange for more promises of investment in U.S. Steel’s Canadian operations.

In its news release, Lakeside said because of the potential sale, it was cancelling a loan and private placement financing that would have brought it $30 million.

Alboini is under investigation by securities regulators for alleged investment offences. The Investment Industry Regulatory Organization of Canada (IIROC) alleges Alboini and other executives of his Northern Securities “failed to create and maintain a culture of regulatory compliance” in the company. Alboini is also accused of showing “a disregard for regulatory compliance by engaging in a trading practice enabling a related-party client to obtain unapproved access to credit.”

A hearing on those charges is set for May next year. Northern and Alboini have denied the charges.

Alboini bought into Lakeside in 2006, a year after Stelco hived off its former tube mill in Welland.

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 imports and higher costs. Revenue was down 28.1 per cent to $47.8 million.

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 was bought by U.S. Steel in 2007, Dofasco was purchased by ArcelorMittal in 2006, Algoma Steel was purchased by India’s Essar Group in 2007 and SSAB Swedish Steel AB bought Ipsco in 2008.

Lakeside 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 is the parent company of Lakeside Steel Corporation, Lakeside Steel Alabama Inc. and Lakeside Steel Texas Inc. Lakeside Steel has operating plants in Welland and Corpus Christi, Tex., and three facilities being constructed in Thomasville, Ala.

Lakeside Steel is a steel pipe and tubing manufacturer with a focus on manufacturing and upgrading pipe for the oilpatch.

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