International Steel Group (ISG) has offered $1.5bn for most of the assets of Bethlehem Steel, the bankrupt US steel firm.

The deal would create the largest steelmaker in the US.

ISG was created nine months ago in order to acquire ailing steel companies who are struggling against overcapacity.

However, reports have suggested the proposed acquisition of Bethlehem would lead to substantial job losses and reduced benefits for the remaining employees.

Done deal?

Bethlehem Steel has been operating under Chapter 11 bankruptcy protection for more than a year, but is not alone among US steel firms to struggle against rising costs.

A combination of Bethlehem and ISG would create a formidable new competitive player in the steel industry Robert Miller, Bethlehem Steel

More than 30 US steel firms have filed for bankruptcy since 1997.

ISG said it believed the proposed acquisition would have the approval of the Bethlehem directors as well as union members of the United Steelworkers of America (USWA).

"Upon the purchase of Bethlehem's facilities, we anticipate a quick and orderly transition to the ISG business model and culture," said Rodney Mott, ISG's president and chief executive.

Bethlehem's chairman Robert Miller said the offer from ISG was a "positive development".

Troubled industry

ISG announced in November that it was considering a bid for Pennsylvania-based Bethlehem and was granted a 60 day exclusive negotiating period.

Mr Miller said it was too early to discuss terms of the deal but confidently predicted:

"A combination of Bethlehem and ISG would create a formidable new competitive player in the steel industry."

The difficulties faced by the US steel industry prompted President George W Bush to introduce tariffs against imported steel last year, although this met with criticism in Europe.