U.S. Steel, Stelco merge, shares up; First Consulting shares zoom on Computer Sciences acquisition

By Sheri Kasprzak

New York, Oct. 31 - United States Steel Corp. closed its acquisition of Stelco Inc., renaming the purchased company U.S. Steel Canada Inc.

The completion of the long-awaited merger sent shares of U.S. Steel up by more than 3.5% Wednesday.

The merger was called "strategically smart" by one sellside trader.

"They've extended their reach into Canada, which is strategically smart for them," said the trader.

The U.S. Steel/Stelco merger wasn't the only merger announced Wednesday. On Wednesday, Computer Sciences Corp. plans to buy First Consulting Group, Inc. in a $365 million deal.

The news sent shares of First Consulting skyrocketing by 27.15% on Wednesday.

In the deal, Computer Sciences plans to buy shares of First Consulting at $13.00 each, a 30.2% premium to the company's $9.98 closing stock price on Tuesday.

Elsewhere, MasterCard Inc.'s stock got a big boost from its third-quarter earnings report, and one trader said the move is good news for National City Corp. as well.

"[MasterCard is] up eight points," said one trader Wednesday morning before the market opened. "Put that valuation on VISA gives [National City Corp.] piece a value of $3.7 billion. You can do a whole bunch of reserve addition and a huge buyback with that kind of money. Buy NCC."

On Wednesday, MasterCard reported that during the third quarter, its earnings were up 63%.

In pre-market action, MasterCard was up 8.18%, or $12.85. The stock went on to gain 20.85%, or $32.76, to end the session at $189.91 (NYSE: MA).

U.S. Steel buys Stelco

In U.S. Steel's merger with Stelco, U.S. Steel paid C$38.50 per share, and warrants to acquire Stelco stock were converted into the right to receive C$27.50 per share.

The news sent shares of U.S. Steel up $3.74, or 3.57%, to end at $108.36 (NYSE: X).

"We welcome the customers, employees and communities of Stelco to the U.S. Steel family," said U.S. Steel chief executive officer John Surma, in a statement released Wednesday.

"This acquisition expands the footprint of our North American flat-rolled operations with facilities on both sides of the Great Lakes to better respond to customer needs, including the ability to process U.S. Steel slabs at other U.S. Steel facilities."

U.S. Steel said it financed the $1.2 billion acquisition cost and refinanced $750 million of existing Stelco debt through a combination of cash on hand, borrowings under a $500 million three-year term loan and a $400 million one-year term loan, and $400 million of sales under a receivables purchase agreement that expires in 2010.

The Pittsburgh-based steelmaker also named the management team for U.S. Steel Canada. Douglas Matthews was named president and general manager; William C. Harrison was named vice president and chief financial officer, Charles J. Shuster was named director of human resources; Scott D. Buckiso was named plant manager of the Lake Erie Works; and Bryan P. Vaughn was named plant manager of the Hamilton Works.

Computer Sciences, First Consulting to merge

In other merger news Wednesday, Computer Sciences agreed to buy First Consulting Group in a $365 million transaction.

Computer Sciences, an El Segundo, Calif.-based information technology company, will pay $13.00 per share for all of the shares of First Consulting.

The deal is set to close in the first calendar quarter of 2008.

Word that Computer Sciences will buy First Consulting's stock at a 30.2% premium sent shares of First Consulting up $2.71 to end at $12.69 (Nasdaq: FCGI).

Shares of Computer Sciences ended the day up 95 cents, or 1.66%, to close at $58.30 (NYSE: CSC).

"This acquisition furthers CSC's Project Accelerate strategy by enhancing our expertise and intellectual property associated with the key healthcare vertical market and expanding our global delivery capabilities," said CSC CEO Michael Laphen, in a news release.

"With this action, we significantly strengthened our healthcare capabilities and offerings, as well as expand our healthcare presence in the United States, Europe and Asia."

"We believe this is an outstanding transaction for our stockholders, clients and employees," said Larry Ferguson, CEO of First Consulting, in a statement. "CSC is at the forefront of the global IT services industry and a very strong player in the healthcare IT space and adding FCG's."

Bristow to sell Grasso business

In other news Wednesday, Bristow Group Inc. plans to sell its Grasso Production Management business to Production Services Network Ltd. for $22.5 million.

The sale is one of a few sales of business segments announced recently. Earlier this week, Kaman Corp. said it was selling its Kaman Music Corp. business to Fender Musical Instruments Corp. in a $117 million cash deal because the company is planning to move into the aerospace and industrial sectors.

A sellside trader said Monday that more sales of businesses may be due to earnings. Kaman's earnings report is set to come out on Friday.

In the Bristow sale, Production Services will pay $22.5 million for the business, which is a contract operator of oil and gas production facilities in the Gulf of Mexico.

"While GPM has been an important part of the company for many years, sale of the business to a strategic buyer will allow GPM and its employees to grow the business while making Bristow Group a pure play in helicopter services, principally to the offshore energy industry," said William Chiles, Bristow's CEO, in a statement.

Bristow's stock closed up $1.48, or 3.06%, to end at $49.89 (NYSE: BRS).

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