OAO Severtstal, a Russian steel company, on Tuesday put forward an offer to buy Stelco Inc., the Hamilton steel marker currently restructuring under creditor protection.

The Russian company said the addition of Stelco's 4 million tons of production would make Severstal one of the largest steel producers in the world.

Severstal said it would assume or refinance Stelco's secured debt, pay cash to Stelco's unsecured bond and trade creditors, contribute approximately $400 million in capital improvements and work with the company and its unions on Stelco's pension issues.

Stelco is in creditor protection.

"We have followed this situation carefully over the past nine months and firmly believe that a credible solution for the challenges facing Stelco must reflect the compelling industry dynamics and benefit all constituencies," Vadim Makhov, the deputy chief executive pfficer of Severstal Group and chairman of Severstal North America, said in press release.

"This offer presents a complete, long term solution for Stelco and its constituencies and would place it within the structure of a world class company dedicated to the steel business for the long run," Makhov said.

Stelco has been in creditor protection since January 29.

Canadian Press reported that Stelco's board of directors were to meet Tuesday to begin looking over options for the company.

From its origins in the former Union of Soviet Socialist Republics in the early 1950s, Severstal is now a publicly-traded company that is controlled by Alexei Mordashov.

Stelco would not be Severstal's first acquisition of a distressed North American steel company. Earlier this year, Severstal bought the Rouge Steel Plant in Dearborn, Michigan, while it was in bankruptcy protection.

Even though it is operating in bankruptcy protection, Stelco has been benefiting from high steel prices. Last week, the company posted a third-quarter profit of $58 million, one of its best quarters ever.

While Severstal had made its bid public, it may not be the only offer for Stelco. Deutsche Bank is expected to back a $200-million equity rights offering, while investment dealer GMP Capatial Corp. has been reported to be offering a $215-million equity deal for Stelco.

Shares of Stelco were up more than 20 per cent in the wake of the announcement. The stock gained 25 cents to close at $1.47 on the TSX.