The century-old Canadian steelmaker, Algoma Steel, has announced it has entered into a definitive agreement with Legato Merger Corp., a New York-based acquisition firm, to go public via a merger worth more than $1 billion U.S. Dollars.
In a statement released late on Monday, the Algemo Steel Inc., said the common shares of the company will be traded on the Nasdaq Stock Market and the company also intends to apply to list its common shares on the Toronto Stock Exchange.
“As a publicly traded company, Algoma will continue to execute its growth strategies under the leadership of Algoma’s current management, with a Board of Directors that will include six directors designated by Algoma, three directors designated by Legato and one jointly nominated,” the statement added.
“Assuming no redemptions by Legato stockholders, the all-stock transaction implies a pro forma enterprise value of more than $1.3 billion at closing and approximately $1.7 billion inclusive of contingent consideration,” the statement said, adding that “In addition to the approximately $236 million held in Legato’s trust account, various investors have committed to participate in the transaction through a PIPE of $100 million at $10.00 per share.”
Michael McQuade, CEO of Algoma, commented “The proposed transaction will provide Algoma with investment capital and an enhanced capital structure to support further transformative investments that are expected to drive improved financial performance and sustainable returns through the steel pricing cycle”.
McQuade further added “We continue to evaluate our strategic options, including the potential for a substantial investment in electric arc steelmaking”.
Meanwhile, DEric Rosenfeld, Legato’s Chief SPAC Officer said “We believe that Algoma’s transformation and potential investments will allow Legato stockholders to participate in a significant value creation opportunity. We are excited to partner with Algoma’s management team which has an impressive track record of implementing cost savings and operational upgrades over the last few years,” said Eric Rosenfeld, Legato’s Chief SPAC Officer.
“At an implied valuation multiple of 1.9 times calendar year 2021 expected Adjusted EBITDA, we believe that the combined company represents a substantial valuation discount to Algoma’s peer group and a great value for Legato’s stockholders,” said David Sgro, Legato’s Chief Executive Officer.