Algoma Steel Gets SPAC Deal: What Investors Should Know

With the price of steel booming, a more than 100-year-old steel manufacturer is going public in a SPAC merger.

The SPAC Deal: Algoma Steel is going public in a SPAC merger with Legato Merger Corp LEGO valuing the company at an enterprise value of $1.7 billion.

The deal values Algoma Steel at 1.9x estimated adjusted EBITDA of $901 million.

Algoma Steel also plans to list on the Toronto Stock Exchange after the merger is completed.

Current Legato Merger Corp shareholders will own 19% of Algoma Steel after the merger is complete.

About Algoma Steel: Founded in 1902, Algoma Steel is a manufacturer of hot and cold steel products. The company produces advanced grades of steel for industries such as automotive, shipbuilding, energy, mining, defense and manufacturing.

The company is Canada’s only plate producer and home to the low-cost Direct Strip Production Complex.

Algoma Steel produces an estimated 2.8 million tons per year and is a key supplier to customers in Canada and the Midwest region of the U.S.

Algoma’s mill is one of the lowest-cost producers of hot rolled sheet steel in North America. The company is also focused on sustainable efforts in steel making.

Related Link: 8 SPAC Trade Ideas From Benzinga's 'SPACs Attack' Hosts 

Growth Ahead: Prices of steel have soared in 2021 leading to strong returns for shares of steelmakers.

Shares of Steel Dynamics Inc STLD are up 68% year-to-date, more than 150% over the last year, and shares of United States Steel Corporation X are up 45% year-to-date, more than 230% over the last year.

Algoma was acquired in 2007 for $1.6 billion by Indian conglomerate Essar Group. The company completed a restructure after the declining price of steel.

Algoma received a credit rating upgrade in February from Moody’s due to the price of steel and expected positive free cash flow.

LEGO Price Action: Shares of Legato Merger Corp are up 2.27% to 9.91 Tuesday afternoon at publication. 

Disclosure: Author is long LEGOU and STLD.

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(Photo: Algoma Steel)