Market goes Posco mad as suitors gather around

Shares of Posco, the world’s third-largest steelmaker, rose for a fifth day to a record high on speculation it may be a takeover target, and as the company’s chief executive met with a senior official from Arcelor Mittal.
Tata Steel Ltd.’s winning bid on Jan. 31 for Corus Group Plc, the U.K.’s biggest steelmaker, renewed speculation there will be more mergers and acquisitions, said steel analyst Lee Eun-young. Roland Junck, an adviser to Lakshmi Mittal, head of the world’s biggest steelmaker, met yesterday with Posco’s chief executive officer Lee Ku-taek in Seoul to discuss cooperation.
Steelmakers across Asia are trying to increase market value and are putting defensive measures in place as takeovers gather pace. Mittal Steel Co. bought nearest rival Arcelor SA for $38.3 billion last year in the industry’s largest acquisition.
“Mergers and acquisitions among global peers are making investors reevaluate Posco,” Ms. Lee, an analyst at Mirae Asset Securities Co., in Singapore said yesterday. “Posco is still cheap compared to its peers.”
The stock rose 3,000 won, or 0.9 percent, to close at a record 343,500 won, after earlier gaining as much as 3.8 percent. Posco, the second-largest stock by market value on the benchmark Kospi index, has surged 7.9 percent in the past five days, and has a market capitalization of 30 trillion won ($32 billion).
The shares, 62 percent of which are owned by overseas investors, trade at about 8.9 times estimated profit, according to Bloomberg’s data. The ratio measures the stock price as a multiple of earnings. Nippon Steel Corp., Asia’s largest steelmaker, trades at 15 times, while JFE Holdings Inc. trades at 14 times.
Mr. Lee has said Posco needs to boost its value to avoid becoming a target. After an investor relations conference on Jan. 11, Mr. Lee said, “There must be no takeover attempts whatsoever.”
At yesterday’s meeting Mr. Junck and Mr. Lee addressed cooperation and did not discuss mergers and acquisitions, Ko Min-jin, a spokeswoman for Posco said.
The session was described by Ms. Ko as a “courtesy call.” Still, the company’s shares gained as much as 4.1 percent on Jan. 29, when the meeting was first reported by the Chosun Ilbo newspaper and later confirmed by Posco.
Mr. Junck is a member of Arcelor Mittal’s six-member group management board, according to the company’s Web site. As well as advising Mittal, his responsibilities include commercial coordination and international affairs, the Web site says.