UNITED KINGDOM: Arcelor Mittal Breaks Vallourec's Pipe Dreams

Shares in French steel tube specialist Vallourec looked more than wobbly on Friday after a bubble of expectation surrounding a takeover bid from Arcelor Mittal burst. The world's number one steel firm opted for a light lunch instead: two steel tube businesses belonging to Vallourec, bought for an undisclosed sum.

After three months of trading above 220 euros ($304), the bottom fell out of Vallourec's share price on Friday when it closed down 11.11 euros ($15.36), or 4.9%, to 216.18 euros ($298.81). The stock was the worst finisher in Paris' CAC 40 index, which closed down 1.8%, or 108.34 points. Arcelor Mittal ticked down 31 eurocents (43 cents), or 0.65%, to 47.56 euros ($65.74).

Investors dropped the stock after news that Arcelor Mittal had signed a preliminary agreement to acquire Precision Soudage and Composants Automobiles Vitry, two fully-owned subsidiaries of Vallourec. The divisions' annual sales are 100 million euros and 45 million euros respectively, and employ 550 people in total.

"It will enable us to strengthen our automotive products portfolio," said Malay Mukherjee, a member of Arcelor Mittal's management board. "The acquisition will also broaden our tubes-related research and development capabilities."

The news effectively killed the market's pipe dream that Arcelor would make a bid for the French company, which has a market capitalization of 12 billion euros ($17 billion). Nor is Vallourec alone: shares in U.S. firm AK Steel and Vinci have been buoyed on rumors that Arcelor Mittal could be preparing an offer.

The steel titan was formed last year when Indian steel baron Lakshmi Mittal bought Luxembourg's Arcelor for 26 billion euros ($36 billion).

Credit Suisse steel analyst Michael Shillaker reiterated his "outperform" rating on Arcelor Mittal on Friday, based on its long-term growth prospects and an eventual upturn in U.S. demand. "If you strip out Chinese exports last year the global steel market was effectively undersupplied," he told clients, adding that demand would rebound in September and October

Via: Forbes

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