AK Steel To Acquire Severstal Dearborn
07/21/2014 - AK Steel has signed an agreement to acquire Severstal North America's integrated steelmaking assets located in Dearborn, Michigan for US$700 million in cash.
The acquisition also includes a cokemaking facility and interests in three joint ventures that process flat-rolled steel products.
Summary of Benefits:
· Increased scale enhances company's ability to better serve customers
· Highly modernized and upgraded steelmaking equipment and facilities
· Additional operational flexibility
· Significant cost-based synergies
· Immediately accretive and credit-enhancing
The Dearborn plant, which produces high-quality, flat-rolled steels primarily for the automotive, construction and appliance markets, completed a large-scale modernization campaign in 2011. During the campaign, major capital was invested in new state-of-the-art equipment and various operational improvements. The Dearborn facility is strategically located in close proximity to many of AK Steel's customers, and the assets at the steel plant and the other acquired facilities complement AK Steel's existing carbon steel operations.
"The acquisition of Severstal Dearborn allows us to grow our business profitability and better serve our customers," said James L. Wainscott, chairman, president and CEO of AK Steel. "It furthers our automotive strategy and strengthens our carbon steelmaking footprint. It also combines great employees at Dearborn with great employees at AK Steel to strengthen a terrific company that is better able to compete, and to win, in the global steel marketplace. We welcome the employees of Dearborn to AK Steel."
The acquisition also increases AK Steel's operational flexibility and enables significant cost-based synergies. "In addition to operational and productivity enhancements, the acquisition will create purchasing, transportation and overhead cost savings," said Mr. Wainscott. "We expect the transaction to be immediately accretive to our earnings and create significant long-term value for AK Steel, our employees, customers and shareholders." The company anticipates annual cost-based synergies of approximately US$50 million, with approximately US$25 million realized in the first full year following the closing of the acquisition.
Dearborn's blast furnace, which was rebuilt in 2007, is among the most efficient and productive blast furnaces in the world for its size. The plant also began operating a new pickle line tandem cold mill and a new hot dip galvanizing line in 2011. Similar to AK Steel's existing carbon steel operations, the Dearborn plant produces hot and cold rolled sheet and hot dip galvanized products, as well as other flat-rolled steel products. The plant employs approximately 1,400 people and is capable of producing about 2.5 million tons of finished steel per year. Upon completion of the acquisition, AK Steel's annual shipments are expected to exceed 7.5 million tons. AK Steel said that it intends to utilize all of Dearborn's production units, and the company has no plans to cease operations at any of its current steelmaking or steel finishing facilities.
AK Steel intends to finance the acquisition with a prudent combination of debt and equity securities and remains committed to enhancing its credit profile. The acquisition is supported by a fully committed bridge financing facility from Credit Suisse.
The transaction is subject to customary closing conditions and regulatory approvals. Subject to the conclusion of the regulatory review, the closing is expected to occur in the fourth quarter of 2014.
Credit Suisse is acting as financial advisor to AK Steel and Weil, Gotshal & Manges LLP is serving as its legal advisor.
Summary of Benefits:
· Increased scale enhances company's ability to better serve customers
· Highly modernized and upgraded steelmaking equipment and facilities
· Additional operational flexibility
· Significant cost-based synergies
· Immediately accretive and credit-enhancing
The Dearborn plant, which produces high-quality, flat-rolled steels primarily for the automotive, construction and appliance markets, completed a large-scale modernization campaign in 2011. During the campaign, major capital was invested in new state-of-the-art equipment and various operational improvements. The Dearborn facility is strategically located in close proximity to many of AK Steel's customers, and the assets at the steel plant and the other acquired facilities complement AK Steel's existing carbon steel operations.
"The acquisition of Severstal Dearborn allows us to grow our business profitability and better serve our customers," said James L. Wainscott, chairman, president and CEO of AK Steel. "It furthers our automotive strategy and strengthens our carbon steelmaking footprint. It also combines great employees at Dearborn with great employees at AK Steel to strengthen a terrific company that is better able to compete, and to win, in the global steel marketplace. We welcome the employees of Dearborn to AK Steel."
The acquisition also increases AK Steel's operational flexibility and enables significant cost-based synergies. "In addition to operational and productivity enhancements, the acquisition will create purchasing, transportation and overhead cost savings," said Mr. Wainscott. "We expect the transaction to be immediately accretive to our earnings and create significant long-term value for AK Steel, our employees, customers and shareholders." The company anticipates annual cost-based synergies of approximately US$50 million, with approximately US$25 million realized in the first full year following the closing of the acquisition.
Dearborn's blast furnace, which was rebuilt in 2007, is among the most efficient and productive blast furnaces in the world for its size. The plant also began operating a new pickle line tandem cold mill and a new hot dip galvanizing line in 2011. Similar to AK Steel's existing carbon steel operations, the Dearborn plant produces hot and cold rolled sheet and hot dip galvanized products, as well as other flat-rolled steel products. The plant employs approximately 1,400 people and is capable of producing about 2.5 million tons of finished steel per year. Upon completion of the acquisition, AK Steel's annual shipments are expected to exceed 7.5 million tons. AK Steel said that it intends to utilize all of Dearborn's production units, and the company has no plans to cease operations at any of its current steelmaking or steel finishing facilities.
AK Steel intends to finance the acquisition with a prudent combination of debt and equity securities and remains committed to enhancing its credit profile. The acquisition is supported by a fully committed bridge financing facility from Credit Suisse.
The transaction is subject to customary closing conditions and regulatory approvals. Subject to the conclusion of the regulatory review, the closing is expected to occur in the fourth quarter of 2014.
Credit Suisse is acting as financial advisor to AK Steel and Weil, Gotshal & Manges LLP is serving as its legal advisor.
