Co-Steel Inc. (TSX:CEI)said Tuesday it will combine its North American operations with Brazil's Gerdeau S.A. a move the two firms said will create a business with annual revenues in excess of $2.5 billion.

Based in Whitby, Ont., Co-Steel will issue over 146.6 million shares to acquire several operations from Gerdeau, including Gerdau Courtice Steel, based in Cambridge, Ontario, Gerdau MRM Steel, based in Selkirk, Manitoba, and AmeriSteel, based in Tampa, Florida.

When the deal closes in the fourth quarter of this year, Co-Steel will be renamed Gerdau AmeriSteel Corp. and will have approximately 198 million common shares outstanding. Existing Co-Steel shareholders will own 26 per cent of the new company, while Gerdau S.A. and its shareholders will hold the remaining 74 per cent.

"This transaction creates the financial resources, the operational critical mass and the professional talent pool needed to contribute to the revitalization of the North American steel industry," Terry Newman, president and CEO of Co-Steel, said in a release.

The merged company expects to save about $35 million annually without any significant capital expense through freight rationalization, product and mill scheduling efficiencies, and other economies of scale.

The company also said its does not anticipate any "material" reductions from its combined 4,800 employees.

Co-Steel shares closed down 43 cents at $3.65 on Tuesday.