Chief Financial Officer Heinz Fuhrmann said Salzgitter hascompleted due diligence for a transaction and will soon enter``serious negotiations.'' The acquisition would be ``mediumsized'' for Salzgitter which has a market value of 5.8 billioneuros ($7.7 billion). He declined to be more specific.
The success of Mittal Steel Co.'s $38.3 billion purchase ofArcelor SA earlier this year is spurring alliances in the steelindustry as producers seek to erect defenses against rival bids.As many as 252 transactions worth about $78 billion have eitherbeen completed or are pending, compared with 219 deals worth lessthan $20 billion in all of 2005.
``We may announce an acquisition in one of our core areaswithin the next few months,'' Fuhrmann said in an interview inFrankfurt.
The shares gained 2.52 euros, or 2.9 percent, to a recordclose of 90.76 euros in Frankfurt. The stock has almost doubledthis year.
There's less than a 30 percent chance that Salzgitter willgo ahead with the purchase of Arcelor Mittal's StahlwerkeThueringen plant in Germany after previously registering aninterest, Fuhrmann said. Investing in Salzgitter's own rollermill in Peine, east of Hannover, may ``require less investmentand might have somewhat more potential,'' he said in the Nov. 28interview.
Record Profit
Salzgitter, based in the city of the same name, producesflat rolled steel and sections as well as tubes. It alsoprocesses steel for customers in the automobile and constructionindustries.
Earlier this month, the company reported record third-quarter earnings earlier as European cold-rolled steel pricesrose 11 percent in the period. Salzgitter also gained 907 millioneuros from the sale of a stake in French tube maker Vallourec SA,increasing net cash to more than 2 billion euros, an amountFuhrmann said will increase further during the rest of the year.
``Acquisition plans are very important for Salzgitter rightnow since they have so much liquidity,'' said Peter Metzger, ananalyst at M.M. Warburg in Hamburg with a ``buy'' rating on thestocks. ``A fitting target would be Arcelor's stake in DillingerHuette.''
Arcelor Mittal owns 51.25 percent of German steelmakerDillinger Huette, according to the company's Web site. Thecompany had 2005 sales of 2.05 billion euros. Metzger said thatDillinger's products would fit well with Salzgitter's currentoffering.
Meet Estimates
``A medium-sized acquisition for Salzgitter could mean 200,300 or 400 million euros in annual sales, something in thatrange,'' said Rochus Brauneiser, an analyst at Kepler Equities inFrankfurt with a ``buy'' rating on Salzgitter shares.
Fuhrmann said the company will meet or exceed an earlierforecast of full-year earnings before taxes of 800 million eurosfor 2006. He said the company's full-year 2007 pretax profit willprobably be similar, while sales may rise.
``I would say 2007 will be an exceptional year, whileexceptional could also mean a bit lower than 2006,'' on the levelof pretax profit, Fuhrmann said. The company has so far beensuccessful in raising prices to pass on increased energy costs,he said.
Fuhrmann said prices for coke have stabilized and maydecline slightly. He said he expects power prices to climb lessin 2007 than they have in the last ``few years.''
