U.S. Steel to Acquire Lone Star Technologies for $2.1B

United States Steel Corporation and Lone Star Technologies, Inc. announced Thursday that they have entered into a definitive agreement under which U. S. Steel will acquire Lone Star for $67.50 per share in cash. The agreement was unanimously approved by the boards of directors of both U.S. Steel and Lone Star.

U. S. Steel expects that the acquisition of Lone Star will strengthen its position as a premier producer of tubular products for the energy sector and will create North America's largest tubular producer. The transaction will broaden U.S. Steel's energy product offerings by joining U. S. Steel's predominantly seamless tubular business with Lone Star's complementary welded tubular business, coupling manufacturing and tubular processing services. Following the transaction, U. S. Steel will have annual North American tubular manufacturing capability of approximately 2.8 million tons.

U. S. Steel expects that the transaction will be accretive to its 2007 earnings per share before considering expected synergies and excluding the accounting effects of the sale of acquired inventory and other customary purchase accounting adjustments. U.S. Steel projects that the combination with Lone Star's operations will generate annual pre-tax operating synergies in excess of $100 million by the end of 2008.

Commenting on the acquisition, U. S. Steel Chairman and CEO John P. Surma said, "This transaction represents a compelling strategic opportunity for U. S. Steel to strengthen our position as a supplier to the robust oil and natural gas sector by significantly expanding our tubular product offerings, our production capacity and our geographic footprint.

"With a comprehensive portfolio of high-end products, enhanced production capabilities, excellent positions in both welded and seamless pipe, and a strong commitment to quality, service and innovation, U. S. Steel will be better positioned to serve the international oil and natural gas industry as the provider of choice for tubular products. Also, because Lone Star is a significant purchaser of hot bands and slabs, this acquisition should allow us to better optimize our domestic hot-end operations over a range of market conditions."

Rhys Best, Chairman and CEO of Lone Star stated, "We are very excited about today's announcement. We believe that this combination will deliver superior value to Lone Star's shareholders as well as provide our employees with an opportunity to be part of a larger enterprise. Our complementary strengths will better position Lone Star to pursue significant new growth opportunities for the benefit of our customers, distributors and end users. This transaction will enable an enhanced and wider range of products, even higher service levels and greater manufacturing efficiencies. We look forward to working with the U. S. Steel team to ensure a smooth transition."

Under the terms of the definitive agreement, U. S. Steel will acquire all of the outstanding shares of Lone Star for $67.50 per share in cash - an aggregate value of approximately $2.1 billion. The price per share represents a premium of approximately 39 percent to Lone Star's closing share price of $48.45 on March 28, 2007, and a premium of approximately 43 percent to its 90- day average trading price.

U. S. Steel will pay for the acquisition 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.

The transaction is subject to the approval of Lone Star's shareholders and other customary closing conditions, including regulatory approvals, and is expected to close in the second or third quarter of 2007.

J.P. Morgan Securities Inc. and Morgan, Lewis & Bockius LLP acted as financial and legal advisers, respectively, to U. S. Steel. Goldman, Sachs & Co. and Weil, Gotshal & Manges LLP acted as financial and legal advisers, respectively, to Lone Star.

United States Steel Corporation is an integrated steel producer with major production operations in the United States and Central Europe.

Lone Star Technologies, Inc. is a $1.4 billion holding company whose principal operating subsidiaries manufacture and market oilfield casing, tubing and line pipe, specialty tubing products, including finned tubes used in a variety of heat recovery applications, and flat rolled steel and other tubular products and services.


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