Lone Star buy to boost U.S. Steel position

NEW YORK (CNNMoney.com) -- United States Steel Corporation is buying Lone Star Technologies, a leading maker of welded oilfield pipes and tubes, in a $2.1 billion cash deal, the companies announced Thursday.

U. S. Steel (Charts) will pay $67.50 a share for Lone Star (Charts), a 39 percent premium to Wednesday's closing price. U.S. Steel said the deal should add to its earnings per share in 2007, excluding charges and special items related to the transaction.

Shares of Lone Star (up $17.83 to $66.28, Charts) soared more than 37 percent following the announcement, while shares of U.S. Steel (up $3.38 to $100.99, Charts) rose 3.4 percent.

U.S. Steel, the nation's No. 2 steelmaker behind Mittal Steel USA (Charts), said the deal would create North America's largest maker of steel tubes and strengthen its position in the growing oil drilling sector by joining its predominantly seamless tubular business with Lone Star's complementary welded tubular business.

The energy industry has spent billions dollars to tap new gas and oil sources in North America and capitalize on the high energy prices of the past three years.

U.S. Steel will pay for the purchase through a combination of cash on hand and financing obtained under its existing receivables purchase program and three new fully committed bank credit facilities provided by JPMorgan (Charts).

JP Morgan Securities and Morgan, Lewis & Brockius LLP acted as financial and legal advisers to U.S. Steel, while Goldman Sachs (Charts) and Weil, Gotshal & Manges LLP advised Lone Star.

-- Reuters contributed to this report

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