A Dutch company has agreed to purchase Ohio-based International Steel Group Inc. to create the world's largest steelmaker, a major step in the 21/2-year restructuring of the once moribund U.S. steel industry.

The $4.5 billion cash-and-stock deal will make ISG part of a new company called Mittal Steel headed by Indian-born billionaire Lakshmi N. Mittal. His Ispat International N.V., based in the Netherlands, will purchase ISG for about $42 a share, with roughly half to be paid in cash and the rest in shares of Mittal Steel. That represents a premium of more than $12 per share over ISG's Friday closing price of $29.68.

The deal also stands as a major success for New York financier Wilbur L. Ross Jr., the chairman of ISG, who built that company over the past 21/2 years by buying struggling U.S. mills. Ross assembled a litany of once-mighty industrial names: LTV, Acme Steel, Bethlehem Steel and Weirton Steel. The total cost of that shopping spree amounted to roughly $2 billion, a price more than doubled by the sale to Mittal.

Ross's consolidation of ailing companies remade the domestic steel industry by forcing old, integrated mills to cut staff and become more efficient. He negotiated landmark labor agreements that trimmed retiree health care and pension costs in return for keeping mills in business, setting the template for competitors such as U.S. Steel and AK Steel to streamline their own operations.

Through his W.L. Ross & Co., Ross himself invested about $100 million in the creation of ISG, he said yesterday in an interview. He controls about 7 million shares, or 7 percent, of ISG stock.

The sale to Mittal "is a good return" on investment, Ross said. "But we did a lot of work to earn that return, getting the steel contract with the union, cleaning up all these companies. It was not just shuffling paper."

The new company will have 165,000 employees in 14 countries, projected revenue of $31.5 billion for 2004 and total steel shipments of about 57 million tons this year, according to a news release.

The deal is a measure of how well the domestic steel industry has recovered in recent years, said Wayne Atwell, a steel industry analyst with Morgan Stanley. "In the last five years half the industry has gone through bankruptcy. We've seen multiple mergers and consolidations, and most of the acquisitions in the last two years have been out of weakness. This is a merger out of strength. It creates an entity with global reach and . . . puts pressure on the rest of industry to pursue a similar model," said Atwell, whose company does banking business with steelmakers.

U.S. steelmakers are benefiting from strong worldwide demand and high prices, driven in part by the high cost of raw materials. Just yesterday ISG announced strong earnings for the third quarter of 2004.

Some experts were skeptical about the acquisition. Peter Morici, a University of Maryland business professor, said that when steel prices inevitably fall, ISG's old-fashioned integrated mills -- which use blast furnaces to process iron ore -- will have a hard time competing with so-called mini-mills, which use newer technology to make steel from scrap metal.

Mittal's acquisition of ISG continues a strategy that has seen him take control of struggling steel mills in places such as Trinidad and Tobago, Mexico and various former Soviet republics. His first U.S. acquisition was Inland Steel in 1998.

Ross will maintain a stake in the new company as well as a seat on the board of directors. The deal must be approved by the company's shareholders. Leaders of the United Steelworkers of America and the Independent Steelworkers Union endorsed the transaction, saying a bigger company promises more security.

Lakshmi N. Mittal is buying weak steel mills worldwide.