ArcelorMittal May Be a Tempting Target

NEW YORK (TheStreet) --Many publicly traded companies have rebounded strongly from the Great Recession. But many steel companies have not.

As detailed in a previous article on TheStreet, stocks such as U.S. Steel (X) Gerdau SA (GGB), AK Steel (AKS), and ArcelorMittal (MT) are now trading well below their book value. So undervalued is ArcelorMittal, the world's largest steel company, that it may be a tempting target for an activist investor to take action to try to drive the share price higher.

At its peak before the recession, ArcelorMittal's stock was about $103 in May 2008.

It's now trading for about $16.15, while the exchange-traded fund for the industry, Market Vectors Steel (SLX), now trades at $47.70, down from about $114 in May 2008. So ArcelorMittal has fallen much more steeply.

The stock is selling at a price-to-sales ratio of 0.37 and a price-to-book value of 0.61. So any suitor would be getting in very cheap.

Steel assets are easy to sell, too. As an example, ArcelorMittal recently entered a 50-50 joint venture with Nippon Steel & Sumitomo Corp. to buy ThyssenKrupp AG's (TKA) steel plant in Alabama for $1.55 billion. That could just as easily be sold.

ArcelorMittal recently announced it will reorganize according to region, while maintaining the product specialization within those divisions. About 44% of ArcelorMittal's crude steel production capacity is in Europe and 39% in the Americas. The reorganization provides a logical outline for how to sell off the divisions.

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