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Novolipetsk Steel to Acquire Beta Steel for US400 million

09/05/2008 - Novolipetsk Steel (NLMK), Russia, signs a definitive agreement to acquire Beta Steel, Portage, Ind., for an all-cash consideration of USD400 million, on a debt free, cash free basis.

Novolipetsk Steel (NLMK), Russia, has signed a definitive agreement to acquire Beta Steel, Portage, Ind., from a group of private shareholders for an all-cash consideration of USD400 million, on a debt free, cash free basis.

Beta Steel operates an 800,000 tons/year (725,000 tonnes/year) EAF-based meltshop and a 1,200,000 tons/year (1,100,000 tonnes/year) hot strip rolling mill. In FY2007, the company’s sales volume reached 602,000 tons (547,000 tonnes) and revenues were USD324 million, with EBITDA of USD21 million.

Beta Steel, an independent steel producer specializing in hot rolled flat steel, currently sells over 35% of its total output to pipe and tube producers. NLMK said its rationale for the transaction is to secure additional upstream integration with the assets of John Maneely Co. (JMC), which NLMK recently agreed to acquire (August 2008).
 
Strategically located in immediate proximity to JMC’s Atlas division assets, Beta Steel supplies pipe HRC to JMC’s Atlas division. NLMK sees Beta as a strong support for JMC’s future growth by providing an increased supply to JMC’s Atlas division while remaining an active player in the U.S. HRC market. NLMK said that it plans to increase Beta Steel’s HRC output by debottlenecking the existing operations as well as by supplying its own slabs for re-rolling.

"We believe that the acquisition of Beta Steel is a timely and matching fit, which will develop our North American presence, increase the sustainability of operations of JMC’s pipe and tube division and provide a solid basis for the future growth of our US operations,” said Alexey Lapshin, NLMK’s President and CEO, commenting on the acquisition.

NLMK said its acquisition of Beta Steel is fully consistent with its stated strategy of product diversification and increasing sales of finished products in its core markets. The combined entity— a new, vertically integrated pipe and tube player in the North American market—will enjoy sustainable HRC supplies from NLMK’s Beta Steel and Farrell facilities supported by competitive slab supply from NLMK’s Russian operations. According to the company, the combination creates a solid basis for further growth of production, revenues and earnings for NLMK’s U.S. assets.

 “We will work closely with the management of Beta Steel to facilitate smooth integration, to extract maximum operational synergies, and to ensure further production growth,” said Lapshin. “This acquisition is fully in line with our commitment to develop a strong footprint in the US high value added finished steel market.”

NLMK said it will finance the transaction from existing cash funds and available credit lines. The transaction is subject to customary regulatory approvals and is expected to close in the fourth quarter of 2008.
 
Headquartered in Lipetsk, Russia, Novolipetsk Steel (NLMK) is a leading steel producer with annual revenues of approximately US$7.7 billion in 2007 and 70,000 employees in production facilities across Russia, Europe and the United States. NLMK produces a variety of steel products such as slabs and billets, hot rolled, cold rolled, galvanized and electrical sheet, rebar, plate and other high value-added products. In 2007, NLMK sold its products in more than 80 countries.

Located in Portage, Ind., Beta Steel specializes in the production and sale of hot rolled coils, primarily to pipe and tube manufacturers and steel service centers. The company operates a 725,000-tonnes/year EAF meltshop and a 1,100,000-tonnes/year hot strip rolling mill of capacity, and employs 350 people. Established in 1992, the company operates modern and well maintained production facilities that allow it to supply a wide range of high-quality HRC products.