Brazilian steelmaker Gerdau said that it planned to take full ownership of its North American unit in a deal valued at up to $1.6bn as it seeks to reduce its debt servicing costs.

It said that it plans to buy all the shares of Gerdau Ameristeel that it does not already own for $11 each. It currently owns 66.3% per cent of Ameristeel.

The Gerdau board said the $11 price represents a premium of 53.4% to the closing share price of Gerdau Ameristeel on the NYSE on June 1, 2010 and a premium of 45.9% to the 30-day volume weighted average price of the shares on the NYSE.

The deal must still be approved by the majority of Ameristeel's shareholders. Ameristeel is expected to benefit from lower funding costs because of Gerdau’s stronger credit rating.