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Evraz, TMK to Buy Ipsco Tubulars from SSAB
03/17/2008 - SSAB announces plans to divest Ipsco Tubulars to Evraz for $4,025 million in cash; Evraz will sell some of the U.S. based Ipsco Tubulars businesses to OAO TMK and its affiliates.
SSAB announced plans on Friday to divest Ipsco Tubulars, its North American tubular operations, to Evraz for $4,025 million in cash.
The agreement between SSAB and Evraz involves the sale of 12 tubular locations, including the Regina and Koppel steel mills (which directly supply the tubular operations), the Regina coil processing facility, and related scrap facilities. Ipsco Tubulars has approximately 3,250 employees.
SSAB will retain the majority of the steel production capacity it acquired as part of its 2007 acquisition of Ipsco, including steel mills located in Mobile, Ala., and Montpelier, Iowa, together with four cut-to-length facilities. The retained units have approximately 1,050 employees.
“This transaction allows us to focus on our core business—to be a global leader within our high-strength steel niches,” said Olof Faxander, President and CEO of SSAB. “We can further grow and develop our steel operations and expand into new markets. Ipsco Tubulars will get an owner with an interest and focus in the tubular business.”
Closely associated with the tubular business is the Ipsco brand, which will be included in the transaction. Although SSAB will retain the right to use the Ipsco brand during a transition period, the steel operations it retains will in the future operate as a Division within SSAB.
Evraz has also entered into definitive back-to-back agreements with OAO TMK and its affiliates, Russia’s leading tubular player, to sell certain of the acquired U.S. businesses for $1.2 billion. Evraz also expects to sell the remaining acquired U.S. businesses of Ipsco Tubulars to TMK for approximately $0.5 billion in 2009.
As a result of these transactions, the net cost of the acquisition for Evraz is expected to be approximately $2.3 billion. Evraz will finance the transaction by a combination of a bridge loan raised at the Evraz level, as well as a non-recourse term loan arranged at the acquired company level.
Commenting on the transaction, Alexander Frolov, Evraz’s Chairman and CEO, said, “Following the successful acquisition of Oregon Steel Mills, this transaction will further enhance Evraz’s existing North American presence in high value-added steel segments. This deal will increase our exposure to the attractive energy and infrastructure sectors throughout the region.
“We expect substantial synergies from the combination of Ipsco Canada and Evraz’s existing North American operations,” continued Frolov. “We are delighted to acquire a company with the long history and outstanding track-record of Ipsco Canada and look forward to welcoming Ipsco Canada’s employees to the Evraz family of companies.”
The SSAB-Evraz transaction is expected to close in the second quarter of 2008 and is subject to approvals from U.S. and Canadian regulatory authorities.
SSAB is a leading producer of high-strength steel. The group’s steel operations consist of three divisions: the Strip Products Division, withmain centers in Borlänge and Luleå; the Plate Division in Oxelösund; and the North American Division as well as two subsidiaries—Plannja representing processing and Tibnor, the group’s trading company. In 2007, the group’s turnover was approximately SEK 48 billion. SSAB employs approximately 13,000 employees in operations or offices in over 40 countries and a worldwide sales presence.
Evraz Group SA is a leading vertically-integrated steel and mining business, producing 16.3 million tonnes of crude steel in 2007. Evraz Group's principal assets include three of the leading steel plants in Russia: Nizhny Tagil (NTMK) in the Urals region and West Siberian (Zapsib) and Novokuznetsk (NKMK) in Siberia, as well as Palini e Bertoli in Italy, Evraz Vitkovice Steel in the Czech Republic, Evraz Oregon Steel Mills and Claymont Steel headquartered in the U.S. Its fast-growing mining businesses comprise Evrazruda, the Kachkanarsky (KGOK) and Vysokogorsky (VGOK) iron ore mining complexes, Yuzhkuzbassugol company and an equity interest in the Raspadskaya coal company. The mining assets enable Evraz Group to be a vertically-integrated steel producer. Evraz Group also owns and operates the Nakhodka commercial sea port, in the Far East of Russia. Evraz vanadium operations comprise Strategic Minerals Corp., U.S., and Highveld Steel and Vanadium Corp., South Africa.
Advisers and Counsel Deutsche Bank is acting as exclusive financial advisor to SSAB. White & Case is acting as legal counsel to SSAB.
Credit Suisse Securities (Europe) Limited and Goldman Sachs International are acting as joint financial advisors to Evraz. Cleary Gottlieb Steen & Hamilton LLP and Blake, Cassels & Graydon LLP are acting as legal counsel to Evraz.
