EoW March 2007

Transat lant ic Cable

But stepped-up scrutiny of foreign acquisitions of American companies in the wake of the Dubai Ports debacle could create a countervailing trend in the US. (It will be remembered that, in March 2006, a state-owned Dubai company seeking a contract to manage terminals at US ports dropped out of the running after an uproar in Congress against foreign ownership of American infrastructure). Recently the interagency body central to the ports furore – the bluntly named Committee on Foreign Investment in the United States – has intensified its oversight, even as the number of foreign companies submitting to the voluntary CFIUS process has grown. Last year, the number of deals vetted for national security concerns by the committee jumped to nearly 100, up from 65 reviews in 2005. Writing in Forbes , Jessica Holzer noted that, in November of last year, CFIUS provoked an outcry from the US business community when it imposed as a condition of its approval of French-based Alcatel SA’s purchase of Lucent Technologies that the deal could be undone should any national security concerns arise. American critics worry that this so-called evergreen provision will become standard practice. (‘National Security Chill on Takeovers,’ 22 nd December). The Forbes article pointed out that newly zealous CFIUS has itself dodged legislation that would have beefed up congressional oversight of its activities. Instead, in an effort to forestall a CFIUS overhaul by Congress, the Bush administration announced that it would implement its own predictably mild reforms of the vetting process. Meanwhile, in the beginnings of a possible vicious cycle, others are adopting the American model. Ms Holzer wrote: “In response to what they see as a shift in the US, countries such as France, Russia, and Canada have passed or are debating laws restricting foreign investment.” This backlash effect is of great concern to Forbes respondent Daniel Price, the chairman of international practice at the law firm Sidley Austin (Chicago). He said: “Big developing markets of tremendous interest to US investors could become increasingly protectionist under the guise of a national security review.”

acquire Canadian rival Harris Steel Group Inc for $1.07 billion. The Charlotte, North Carolina-based company’s purchase of the Toronto steel producer ‘significantly advances Nucor’s downstream growth initiatives,’ said Dan DiMicco, Nucor’s chairman and chief executive. Harris is obviously a significant acquisition for the second- largest US steel producer. But, as noted by James P Miller of the Chicago Tribune , the deal is ‘dwarfed’ by some of the recent cross-border combinations that are transforming the competitive landscape of the world’s steel industry. He noted that “Russian and European producers have been busily picking up US-based assets, for example, and a Brazilian company is locked in a bidding war with an Indian firm to buy Britain’s leading steelmaker for about $8 billion.” (3 rd January). As the classic mode of consolidation within a single nation is gradually eroded, US companies have more often been the targets than the instigators of takeovers. In November 2006, the Russian conglomerate Evraz Group SA bought Oregon Steel Mills Inc for $2.3 billion. Only weeks before, Tenaris SA, an Argentine entity with headquarters in Luxembourg, bought Oregon Steel competitor Maverick Tube Corp, of Missouri, for $2.4 billion. Russian steel interests now own a major steel mill in Dearborn, Michigan; and late last year speculation was rife that even US Steel Corp might be acquired by a growth-minded Russian producer. But the Tribune pointed out that the global merger-and- acquisition ‘binge’ in the steel industry has been fuelled by strong conditions that may not prevail for much longer. China is still importing steel from producers around the world, drawing down supply and propping up the price of steel. But a cooling US economy is causing demand for steel to abate and prices to soften somewhat. Even as to the Nucor-Harris Steel deal, Mr Miller notes that it ‘comes at a time when steel prices have weakened after three years of relatively strong levels, and when experts think prices might be vulnerable to further decline.’ Other steel news . . . If tougher times lie ahead for Nucor, they have not yet struck. On 25 th January the company posted fourth-quarter 2006 results termed ‘terrific’ by one independent analyst: a sharp rise in profit as prices went up and customer stockpiles started to decline. Net earnings increased to $408.2 million from $341 million a year earlier, the highly successful mini-mill operator said. Nucor forecast good demand in 2007, and said it expected excess inventory levels to continue to go down at the service centres which buy steel from the producers and custom-process it for their own customers. ❈

Steel

Nucor is paying $1.07 billion for a rival steelmaker in Canada

Joining the consolidation trend sweeping the global steel industry, US steelmaker Nucor Corp on 2 nd January agreed to

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EuroWire – March 2007