Ruias owned Essar Steel on Monday announced that they have agreed to acquire Canadian Algoma Steel for an aggregate value of Canadian $1.8 billion (approx. US $1.58 billion) to be paid in cash.

Commenting on the deal Shashi Ruia, chairman Essar Global Ltd, an arm for Essar Groups' international operations, said: "We believe Algoma is an excellent addition to our existing steel business and also offers growth potential. This acquisition fits in with our global steel vision of having world class low cost assets with a global footprint."

Benjamin Duster, chairman of Algoma's board of directors said, "The Board of Directors unanimously supports the Essar proposal as it reflects a significant premium to the historical share price of Algoma."

Algoma Steel is an integrated steel producer based in Sault Ste. Marie, Ontario with steel shipments of 2.4 million tonne in 2006. It has a revenue of Canadian $1.9 billion which are primarily derived from the manufacture and sale of rolled steel products, including hot and cold rolled steel and plate.

The offer price of Canadian $56 per share represents a premium of 48 per cent to Algoma's stock price for the 20-day period ending on February 14, 2007 when Algoma confirmed that it was in discussions regarding a potential transaction, a joint statement by the two companies said.

The arrangement must be approved by Algoma's shareholders by the affirmative vote of at least 66 per cent (2/3rd) of the votes cast, in person or by proxy, at a shareholders meeting, and is subject to customary closing conditions including necessary regulatory approvals.

The support agreement provides for payments to Essar in the event that the acquisition is not completed under certain circumstances.