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Russia's Evraz steelmaker:

in talks to buy steelmaker Ipsco

Russia's biggest steelmaker, Evraz Group SA, which completed a major acquisition in the United States at the start of the year, is in talks to acquire Canada-U.S. steelmaker Ipsco Inc. (TSX:IPS), a business daily reported Thursday, citing unnamed sources.

With headquarters in Lisle, Ill., Ipsco operates four steel mills, 11 pipe mills, nine product-finishing plants and nine scrap processing centres at 25 locations in the United States and Canada.

Evraz's management held acquisition talks several weeks ago with Ipsco, the Vedomosti paper said, citing two unnamed businessmen familiar with Evraz's shareholders.

Irina Kibina, vice-president at Evraz, declined to comment on the report when contacted by The Associated Press.

In January, Evraz completed the takeover of Oregon Steel in the United States for US$2.3 billion, one of the largest investments in the United States by a Russian company. Evraz already owns steelworks in the Czech Republic and Italy.

Billionaire Chelsea soccer club owner Roman Abramovich holds 41 per cent of Evraz's shares.

Andrei Litvin with the MDM investment bank in Moscow said the deal was "theoretically possible" and called IPSCO an attractive and profitable target that would allow Evraz to diversify geographically and in terms of the products it makes.

However, he said there was a question mark over how Evraz would finance the acquisition of a company with a market value of some US$6 billion. Since the Oregon Steel deal, Evraz has the highest debt burden among Russian steel companies.

Ipsco booked its best-ever annual results in 2006, but fourth-quarter profit was down 18 per cent as costs rose while volumes were scaled back, and slackness is expected to continue into this year.

The maker of tubular steel and steel plate, a major supplier of pipe to oil and gas producers, earned US$643.1 million or $13.43 per share for the year. That was up from 2005 net income of US$585.8 million or $11.96 per share, on robust demand for energy pipeline products.

On the Toronto stock market Wednesday, Ipsco shares closed at C$148.87, down $4.08 or 2.7 per cent. That gives the firm a stock market value of more than C$7 billion.

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