March 29 (Bloomberg) -- U.S. Steel Corp., the biggest U.S.- based steelmaker, agreed to buy Lone Star Technologies Inc. for $2.1 billion to become North America's largest producer of oil and gas pipes.

The purchase at $67.50 a share, 39 percent above Lone Star's close yesterday, will boost per-share earnings this year and yield savings of more than $100 million by the end of 2008, Pittsburgh-based U.S. Steel said today in a statement. Lone Star is based in Dallas. U.S. Steel's shares rose to a record, and rival Ipsco Inc. surged the most in six years.

The acquisition will boost U.S. Steel's North American tubular-manufacturing capacity 56 percent to 2.8 million tons a year, surpassing Ipsco. U.S. Steel, led by Chief Executive Officer John P. Surma, will gain Lone Star's welded tubes, used to build pipelines, to complement production of high-quality seamless pipes for extracting natural gas from deep waters.

``Drilling activity is very good, and I think this transaction makes sense,'' said Charles Bradford, an analyst at Soleil Securities in New York who rates U.S. Steel ``sell.'' ``Lone Star had been on the list for a takeout for about a year.''

U.S. Steel rose $3.61, or 3.7 percent, to $101. in New York Stock Exchange composite trading, the highest close ever. The shares have gained 60 percent in the past year. Lone Star surged $17.66, or 36 percent, to $66.11. The stock has gained 17 percent from a year ago.

High Margins

Sales of tubular products have ``by far the highest'' margins of U.S. Steel's business, said Sam Halpert, a steel- industry analyst at New York-based asset manager Van Eck Global.

Some analysts had speculated U.S. Steel might sell its tubular business, Halpert said. Today's transaction, scheduled to close in the second or third quarter, ``takes that off the table,'' he said.

U.S. Steel had profit of $631 million from its tubular business last year on sales of $1.2 billion. The company got a new $1.75 billion credit facility from JPMorgan Chase & Co. for the buyout, Chief Financial Officer Gretchen Haggerty said today on a conference call with analysts.

Energy explorers increased spending after oil and gas prices more than doubled in the past five years. Exxon Mobil Corp., the world's biggest publicly listed oil company, plans to spend almost $21 billion exploring for oil and expanding refineries this year.

Ipsco Jumps

Shares of Ipsco, based in Lisle, Illinois, jumped $12.20, or 10 percent, to $130.41 on speculation the company might be a takeover target. The percentage gain was the biggest since February 2001. Ipsco's pipe-manufacturing capacity is 2.4 million tons.

U.S. Steel plans to increase sales in emerging markets such as India, China and Brazil, where Lone Star established joint ventures or is negotiating partnerships.

Steel mergers have surged in the past two years, led by Mittal Steel Co.'s $38.3 billion buyout of Arcelor SA, the biggest ever.

Tenaris SA, the world's biggest supplier of seamless oil and gas pipes, completed the purchase of Maverick Tube Corp. of the U.S. for $2.82 billion in October to expand in North America. Last month, Tenaris agreed to buy Houston-based Hydril Co., which makes valves and meters for drilling in deep waters.

U.S. Steel's profit in 2006 rose 51 percent to a record $1.37 billion. Sales gained 12 percent to $15.7 billion.

`Compelling Opportunity'

The Lone Star transaction ``represents a compelling strategic opportunity to strengthen our position as a supplier to the robust oil and natural-gas sector by significantly expanding our tubular-product offerings, our production capacity and our geographic footprint,'' Surma, 52, said in the statement.

Sales at Lone Star, led by CEO Rhys Best, climbed 7.2 percent last year to $1.38 billion.

J.P. Morgan Securities Inc. advised U.S. Steel, and Goldman, Sachs Group Inc. advised Lone Star.

Steel-company mergers and acquisitions were valued at $95 billion in 2006, according to data compiled by Bloomberg. About 270 transactions totaling $33 billion were concluded in 2005.

Voestalpine AG, Austria's biggest steelmaker, agreed today to buy specialty steel-producer Boehler-Uddeholm AG for 3.52 billion euros ($4.69 billion), foiling a bid by private equity company CVC Capital Partners Ltd.

Voestalpine is based in Linz, Austria, and Boehler is based in Vienna.

To contact the reporter on this story: Dale Crofts in Chicago at dcrofts@bloomberg.net

Last Updated: March 29, 2007 16:30 EDT