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Two perennial problem children of Canada’s steel industry would be merged into one steel maker if the New York private equity firm that has been nominated as the buyer for Essar Steel Algoma Inc. has its way.
“I can confirm that it is our intention to acquire each of Algoma and Stelco [U.S. Steel Canada] and merge them,” Mike Psaros, co-founder and co-managing partner of KPS Capital Partners LP, said Wednesday.
An offer by KPS and the term lenders of Essar Algoma has been chosen as the successful bid by Essar Algoma’s board. It is conditional on KPS signing a new labour contract with the unions that represent employees in Sault Ste. Marie, Ont., as well as an agreement with the Ontario government.
The comments by Mr. Psaros are the first public confirmation that the private equity and turnaround firm is bidding for U.S. Steel Canada. The proposed plan to combine the two companies is a deal that would create a steel maker capable of producing about five million tons of steel a year.
“There are offensive mergers and defensive mergers,” Mr. Psaros said in a telephone interview. “In defensive mergers, you put two companies together and you shut stuff down. This is an offensive merger.”
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