This is a strange installment of another soap opera in the steel business, and proof again, if more proof is necessary, that stock investors are not always a good thing for long term investment companies like steel makers.
Now, if stock investors could learn to invest for longer than a calendar quarter it might be a different story, but steel making equipment doesn’t pay off in a calendar quarter, and neither does most other investment in this industry.
Algoma Steel Inc. (TSX:AGA – news) has settled a fierce proxy battle with its biggest shareholder by agreeing to make a special $200 million cash payment to shareholders.
But, in doing so, it has angered its union. The Sault Ste. Marie-based steelmaker announced Tuesday that it has struck a deal with Paulson & Co. Inc., a New York-based hedge fund which owns a 19 per cent stake in the company. The agreement comes after Algoma CEO Denis Turcotte travelled to New York to meet with Paulson executives this week.
Last year, the northern Ontario steelmaker rejected a proposal from Paulson which outlined how Algoma should pay out more than $400 million in cash to its shareholders.
In response, Paulson launched a proxy battle to replace Algoma’s board. That battle was to have been decided at a March 22 meeting, where Algoma’s shareholders were to vote on whether to replace the board.
That meeting has been cancelled as a result of Tuesday’s deal.
But the deal has angered the United Steelworkers union, which had gone to the Ontario Superior Court in an effort to stop Paulson, whose actions they fear will weaken the company’s finances.
The court’s decision is still pending.