Steel manufacturer Tenaris S.A. (TS) has agreed to acquire a steel and tube pipe manufacturing plant in Louisiana from Benteler North America Corp. The latter is a group company of Benteler.
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Tenaris is acquiring all shares of Benteler Steel & Tube Manufacturing Corp. at a transaction price of $460 million. The transaction also includes working capital of $52 million.
The acquisition, which is subject to approval, is anticipated to close in the fourth quarter of 2022. The acquired plant has a pipe rolling capacity of 400,000 metric tons annually. Most importantly, the move bolsters Tenaris’ production range and presence in the U.S.
Despite the recent share price decline, Tenaris shares are still up 14.17% so far in 2022. The Street has a Strong Buy consensus rating on the stock and sees a further 86.75% potential upside in Tenaris.
Last month, Tenaris resolved an investigation by the U.S. SEC about allegations of improper payments in Brazil. Concurrently, the DOJ also closed its inquiry into this issue without taking any action on Tenaris.
Notably, in 2016, Tenaris voluntarily informed the SEC and DOJ about the issue, and under the settlement paid a combined total of $78.1 million to resolve this issue. Additionally, the company has undertaken a number of steps to fortify its compliance and has terminated its commercial agents in Brazil while also decreasing the use of commercial agents globally.
Analysts’ Take on Tenaris
Yesterday, Jefferies analyst Alan Spence increased the stock’s rating to Buy from Hold while also upping the price target to $46 from $35.70. In the steel space, Spence is positive on oil country tubular goods (OCTG) and is buoyant on Tenaris given its OCTG presence.
Positive Hedge Funds
At the same time, the TipRanks database indicates hedge funds are very positive about Tenaris and have increased holdings in the stock by 792,900 shares in the last quarter. Moreover, George Soros’ Soros Fund Management is a new entrant in Tenaris with a holding of $1.5 million.
Closing Note
The resolution of SEC and DOJ investigations and the Benteler acquisition were key catalysts for Tenaris. Moreover, the entry of George Soros and a near 87% potential upside mean investors should keep Tenaris on their radar.
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