Algoma Steel rejects shareholder payout request
Canadian steelmaker Algoma Steel Inc. disclosed Tuesday night that it has rejected a demand from major investor Paulson & Co. for a big payout.
New York hedge fund Paulson & Co. is Algomas largest shareholder, controlling 19 percent of company shares. The company has made a request that cash-rich Algoma refinance its outstanding debt and distribute $420 million in cash to shareholders.
Paulson & Co. president John Paulson made this demand in a letter to Algoma last week, asking the steelmaker to refinance in order to improve its depressed stock price.
Algoma rejected the offer, stating, The steel industry is entering a period of uncertainty with respect to the cost of raw materials and the pricing of steel products. The board believes it is appropriate in this environment to maintain a significant level of liquidity, which would be compromised under Paulson's proposal.
Paulson & Co., however, does not seem to be taking no for an answer. The company is currently in the process of sending Algoma a legal request for a shareholder meeting, with the goal of electing a new board of directors.
John Paulson has voiced his wish to replace the majority of Algomas CEOs, as he believes Algomas mismanagement during the past two years is the reason for the companys unimpressive stock prices.
Algoma Steel Inc. is an integrated steel producer based in Sault Ste. Marie, Ontario. Major products include hot and cold rolled sheet and
plate.