Algoma Steel Inc. has dropped out of the bidding war for restructuring Stelco Inc., citing ‘too many risks and obligations’ associated with a potential takeover of the Hamilton steel giant.
The northern Ontario company announced late Wednesday it was withdrawing from the process to refinance or take over Stelco, just a few days before a deadline next Monday for formal bids.
At the same time, Algoma reported fourth-quarter profits that were 10 times what the steelmaker earned in the same 2003 period. Algoma emerged from its own bankruptcy court restructuring in 2001, the second time it did so in its long history.
Algoma did not specify what obligations would be required of the company if it managed to take over Stelco, though the United Steelworkers have been clear that the union wants any potential buyer to address a $1-billion-plus deficit in workers’ pension plans.
Algoma has been engaged since mid-December in a due diligence review of Stelco’s operations and in discussions with the Hamilton company and the union.
“Algoma’s due diligence has confirmed that there are significant potential benefits in a combination of Algoma and Stelco, but given the risks and obligations associated with the acquisition, we have concluded that proceeding with the transaction would not be in the best interests of our shareholders,” Algoma CEO Denis Turcotte said in a statement after stock markets closed.