The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Tony Van Alphen published in the April 5, 2006 edition
By Tony Van Alphen
Toronto Star
(Apr 5, 2006)
Speculation of an eventual takeover fuelled another huge
increase in Stelco Inc. stock yesterday, only a few days after the company
emerged from a major restructuring.
Shares of Hamilton-based Stelco shot up $4.51 or more than
23 per cent to close at $24 each in trading on the Toronto Stock Exchange.
Volume topped 1.6-million shares.
Since issuing stock at $5.50 on Monday, the company's shares
have rocketed a stunning 336 per cent in two trading days.
That has created a paper windfall for key lenders and
creditors who got new Stelco shares at $5.50. Furthermore, the company allowed
Rodney Mott, its new chief executive officer, to also buy one million shares at
$5.50 each. It has left him with an astounding two-day paper profit of $18.5
million.
As Stelco's stock surged for the second day, analysts said
it appears investors bought on the idea that the company will be part of the
takeover trend engulfing the international steel industry.
"There are people who perhaps believe Stelco will be
worth something down the road as industry consolidation continues," said
Fred Ketchen, director of equity trading at Scotia Capital. "They're
hoping to profit from it."
Shareholders of Hamilton-rival Dofasco Inc. realized a
premium of more than 40 per cent on their stock when Arcelor SA won a bidding
war for the company earlier this year. Algoma Steel of Sault Ste. Marie, Ont.,
has also acknowledged renewed interest by outside parties.
Some watchers think Mott's personal investment in Stelco
also boosted the value of shares. But Ketchen said there is "a lot of
hype" around the stock now and investors should be careful.
"The stock is starting to run away," he said.
"One should know the risks and govern themselves accordingly."
Stelco, the country's second biggest integrated steelmaker,
gained court protection from creditors in January 2004 because of a high cost
structure and big pension liabilities.
The company sold some assets, cut staff, reduced costs and
negotiated about $1.4 billion in loans and notes in a restructuring plan. It
finally emerged from court protection last Saturday.
Industry watcher John Novak described Stelco as a
"speculative investment" dependent on improving operations and stable
steel prices.
Novak, an analyst at CIBC World Markets, has forecast a
Stelco stock price of $15 during the next 12 to 18 months.
Novak said in a report this week that Stelco shares could
generate "decent value" after completion of cost reduction
initiatives. The company's Lake Erie operations and iron ore assets also make
Stelco an attractive target as industry consolidation continues, he added.
In addition to Mott, major Stelco shareholders have made
stunning gains on paper this week. For example, Tricap Management, which holds
about 35 per cent of Stelco's shares, saw the value of its stake increase more
than $180 million.