AK Steel Surges on Renewed Takeover Chatter

AK Steel Holding Corporation (AKS) saw unusually high call option activity Monday as renewed takeover chatter drew speculators. Some 31,736 call options changed hands, which is more than 5x the average daily volume of 7,010 contracts. The majority of the action could be seen in the September $60 calls, which are extremely out-of-the-money strikes, especially given the fact there are merely 10 days until expiration. Implied volatility on the options are also up to 101, above an average of 67.

Talks of a deal resurfaced on reports that the firm has been entertaining sale talks with multiple parties. Sources familiar with the situation have noted that the company is interested in an all-cash offer and has informally been on the block for a couple of months. The company refused to confirm or deny the rumors, but shareholders have certainly entertained them. In fact, the company has been the subject of such rumors for some time.

Shares of AK Steel are trading in the middle of their 52-week range. Investors are hoping that lower energy costs will help reduce overhead and improve margins while a housing recovery could spur demand for the commodity. In the meantime, continued strength in China has kept the price of steel proped up relatively high. The firm’s second quarter earnings soared past expectations with net income up 32%, but the company said it saw slower third quarter shipments.

AK Steel Holding Corporation is a producer of flat-rolled carbon, stainless and electrical steels and tubular products through its wholly owned subsidiary, AK Steek Corporation. The company’s operations consist of seven steelmaking and finish plants located in Indiana, Kentucky, Ohio and Pennsylvania that produce flat-rolled carbon steel, including coated, cold-rolled and hot-rolled products, and specialty stainless and electrical steels that are sold in many forms.

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