The biggest steel producer in Europe wants to buy Dofasco. Arcelor SA of Luxembourg is offering $4.3 billion for the Hamilton, Ont.-based steelmaker.

The CEO of Arcelor says the deal would be good for both companies as consolidation heats up in the global steel industry.

"We think that this agreement will be good for all the stakeholders of Dofasco," Arcelor CEO Guy Dolle said in a conference call with analysts.

"It's good for the shareholders, it's a good premium. It's good for the employees of Dofasco, we want to develop the company. It's good for the customers of Dofasco and it will be also good for the community close to Hamilton."

Arcelor's $4.3-billion offer works out to $56 in cash for each share of Dofasco. The bid is a 27.3 per cent premium over Tuesday's closing price of $44.

Dofasco has 7,400 employees compared to the 94,000 working for Arcelor in more than 60 countries.

Dofasco's leadership hasn't said yet whether it will accept the bid. It's urging shareholders to wait until the company has examined the offer.

"The board will give due consideration to the Arcelor bid," Dofasco chairman Brian MacNeill said in a statement.

"Pending the board's recommendation, shareholders are urged not to tender to the offer."

Dofasco's board has hired RBC Capital Markets as financial adviser on the deal, and law firm Fasken Martineau DuMoulin LLP has been hired as legal adviser.

Arcelor has raised the issue of a takeover before, but its offers were rejected by Dofasco's management. This time, Arcelor is taking its bid directly to Dofasco's stockholders.

Dofasco earned $5.2 million in the third quarter. That compares to $115 million in the same period a year ago.

The steel industry has been a hot sector for mergers and acquisitions lately. A PricewaterhouseCoopers report released in August showed there were 117 deals in the industry last year. They had a total value of $31.4 billion.

Mittal Steel became the world's biggest steelmaker in April. It bought American-based International Steel Group for $4.5 billion US. The move brought its total workforce to 180,000 people with plants in 14 countries.

If the acquisition of Dofasco is successful it would be Arcelor's largest takeover yet.

Dofasco would become Arcelor's platform in North America, and would fit with Arcelor's plans to expand in the region.

Canada's steelmakers haven't been following the global trend of consolidation. In August, Sault Ste. Marie, Ont.-based Algoma Steel gave up its search for a buyer. Hamilton based Stelco has also turned down offers from several potential buyers.

But, Arcelor's CEO Guy Dolle says Dofasco must accept that consolidation is inevitable.

"Due to its size, it has to choose not to stay alone but with what kind of partner it will join in the future," Dolle said.

"We do believe that Arcelor is the best one because it helps us to address the issue regarding our automotive position."

The two companies have worked together in the past. They collaborated on the DoSol Galva LP joint venture. The hot dip galvanizing line was 80 per cent owned by Dofasco and 20 per cent by Arcelor Auto.

Shares of Dofasco were up sharply on Wednesday, gaining 35 per cent on the TSX after the opening bell. As of Tuesday, the stock's 52-week high was $48.74, its 52-week low was $31.25.