Stelco’s underfunded pension plan and other post-employment benefits could prevent the company from being taken over, according to a report by Scotia Capital.

Analyst David Tyerman writes that a takeover is unlikely “especially if the company’s pension and OPEB is taken into account.”

The aggregate underfunded position of these plans stood at about $1.45 billion at the end of June.

He believes that the pension and OPEB “could prove a major roadblock to a deal, as it is hard to come up with positive equity value if one includes pension and OPEB obligations in a valuation.”

In June, Stelco announced it was reviewing strategic options for the company in light of the ongoing consolidation in the steel industry.

Canadian steelmakers Dofasco, Algoma and Harris have all been acquired by foreign competitors over the past couple years.

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