Merger LEGO

Algoma steel to go public via merger with Legato

, SPAC research

The Canadian parent company of privately held Algoma Steel Inc, a leading independent steel producer with extensive steelmaking and finishing operations in Sault Ste. Marie, Ontario, Canada, and LEGO, today jointly announced that they have entered into a definitive merger agreement that will result in Algoma becoming a publicly listed company with its common shares traded on the Nasdaq. Algoma also intends to apply to list its common shares on the Toronto Stock Exchange.

Based in Sault Ste. Marie, Ontario, Canada, Algoma is a fully integrated steel producer of hot and cold rolled steel products including sheet and plate. With a current raw steel production capacity of an estimated 2.8 million tons per year, Algoma's size and diverse capabilities enable it to deliver responsive, customer-driven product solutions straight from the ladle to direct applications in the automotive, construction, energy, defense, and manufacturing sectors. Algoma is a key supplier of steel products to customers in the Canadian and Midwest USA and is the only producer of plate steel products in Canada. The Company's mill is one of the lowest cost producers of hot rolled sheet steel (HRC) in North America owing in part to its state-of-the-art Direct Strip Production Complex ("DSPC"), which is the newest thin slab caster in North America with direct coupling to a basic oxygen furnace (BOF)  melt shop.

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. In addition to the approximately $236 million held in LEGO's trust account, various investors have committed to participate in the transaction through a PIPE of $100 million at $10.00 per share. The PIPE includes significant investments from strategic steel industry participants, as well as investments from Legato's Chairman, TD Wealth Management, Vantage Asset Management, JC Clark, Hite and Goodwood Fund. The merger agreement provides that Algoma's existing shareholders and management team will, collectively, own 75 million Algoma common shares on a fully-diluted basis, with an implied value of $750 million at $10 per share. 

Paul, Weiss, Rifkind, Wharton & Garrison LLP and Goodmans LLP are acting as legal counsel to Algoma and Jefferies LLC is acting as financial advisor to Algoma. Graubard Miller is acting as legal counsel to LEGO and EarlyBirdCapital, Inc., BMO Capital Markets and Maison Placements Canada are acting as financial advisors to LEGO. 

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