AK Steel is seen as takeover target

AK Steel is seen as takeover target

AK Steel Holding Corp. the leading bidder for the purchase of bankrupt National Steel Corp., has failed to reach a labour agreement with the United Steelworkers of America (USWA). And now, the company is seen as a potential purchase target by other steel companies. France's Arcelor, Germany's Thyssen Krupp, Brazil's Companhia Siderurgica de Tubarao (CST) and United States Steel Corp. which are producing carbon, stainless and electrical steel for the automotive, construction and other industries, are possible interested parties for the company. After losing its bid for National Steel Corp., AK Steel ’s shares decreased to $3 per share from $7.6 while US Steel, the successful bidder of National Steel's shares are trading for $17/share. Due to rising costs and weakening demand, AK Steel has announced losses for two straight quarters. Furthermore, analysts foresee that AK Steel will continue to deficit through the third quarter of 2004. In addition, AK Steel has failed to secure agreement with USWA because of 3 year lockout of USWA workers at its plant in Middletown, Ohio. The legacy costs are becoming a financial burden on AK Steel. AK Steel is favoured in the US due to its pre established relationship and high quality production. Therefore it is not expected to go bankrupt in short term. However, with its advantages such as excess capacity to process semi finished steel, it might be appealing for foreign investors to expand in the US market. Analysts believe AK Steel will either acquire or be acquired after this stage.