Steel & Tube shares rose 26.67 percent after 50.27 percent owner OneSteel announced a cash bid to buy other shareholders out at $4 a share.
The bid by the Australian parent is seen as opportunistic in a weak share market. Investors looking to cash up may be tempted but investors may also not want to see another company leave the New Zealand share market.
A committee of independent directors at Steel & Tube told shareholders to wait for a target company statement, including independent report, on which a recommendation will be based.
OneSteel said its offer is a 17 percent premium to the volume-weighted average price in September and a 33 percent premium to the close on Friday.
The bid comes after the share market has fallen 21.1 percent since January. Steel & Tube shares have fallen from $4.52 on October 3, 2007. The shares closed up 80c at $3.80 today.
Fund managers and stock brokers said they were waiting for the independent report and directors' recommendation before deciding what to do.
While the shares trade below the bid price it is an indicator that the bid may be successful.
"My initial impression is the bid looks a little on the light side," said Grant Williamson, partner at Hamilton Hindin Greene.
Steel & Tube did not have a great year last year but is promising a better year next year.
"It is another company that could leave the NZX. We don't want to see good quality companies leave the market," he said.
The bid is conditional on 90 percent acceptances, Overseas Investment Office approval and that the NZX50 index does not close below 2710 on three consecutive days before the bid becomes unconditional.
OneSteel will spend $175m if it is successful and says funding is not an issue.
OneSteel makes the point that there are unlikely to be competing bids without its involvement when it owns 50.27 percent of the company.
The offer is 9.6 times 2008 earnings before interest, tax, depreciation and amortisation.
OneSteel managing director Geoff Plummer said the offer would allow OneSteel to simplify its corporate structure and efficiently manage the Steel & Tube business as part of the OneSteel group.
OneSteel intended to retain the Steel & Tube brand and increase its business.