The Canadian parent company of privately held Algoma Steel and Legato Merger today announced that they have entered into a definitive merger agreement that values the combined company at $1.7 billion. The announcement confirms earlier news reports this week that a deal was imminent.
In addition to the approximately $236 million held in Legato’s trust, various investors have committed to participate in the transaction through a $100 million PIPE at $10 per share. The PIPE includes investments from strategic steel industry participants, as well as investments from Legato’s Chairman, TD Wealth Management, Vantage Asset Management, JC Clark, Hite and Goodwood Fund.
A subsidiary of Algoma will be merged with and into Legato, with Legato surviving the merger as a wholly-owned subsidiary of Algoma. The merger agreement provides that Algoma’s existing shareholders and management team will own 75 million Algoma common shares on a fully-diluted basis, with an implied value of $750 million at $10 per share. The agreement also provides that Legato stockholders will receive one Algoma common share for each share of Legato common stock and that each Legato warrant will be assumed by Algoma and become exercisable to purchase one Algoma common share at $11.50 per share. The transaction includes contingent consideration of up to 37.5 million Algoma common shares payable to Algoma’s existing shareholders and management team if certain Adjusted EBITDA targets for calendar year 2021 or stock price targets in the five years following closing are achieved.
Shares would trade on the Nasdaq. Algoma also intends to apply to list shares on the Toronto Stock Exchange.
Pending regulatory and shareholder approvals, the deal is expected to close in the third quarter. Read more.
