SeverStal to Acquire Sparrows Point
03/24/2008 - OAO SeverStal reaches agreement to purchase the Sparrows Point facility from ArcelorMittal for an all-cash purchase price of US$810 million.
OAO SeverStal has reached an agreement to purchase the Sparrows Point facility in Baltimore, Md., from ArcelorMittal for an all-cash purchase price of US$810 million.
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USW Approves Severstal Acquisition of Sparrows Point
United Steelworkers President Leo W. Gerard has confirmed the union's initial approval of Severstal North America’s acquisition of the Sparrows Point steel mill.
The union currently represents some 2200 steelworkers at the Sparrows Point facility.
Gerard said that negotiations with both the seller and the new buyer of the Sparrows Point steel mill have been completed.
David McCall, Chair of the USW bargaining committee for ArcelorMittal in North America, said, "In the search for a buyer, following the unraveling of a previous proposed deal last December, we have always maintained that the union will not reach agreement with a successor unless it includes a long-term business and operational strategy that produces security for our members, their families and our retirees. We now have that at Severstal."
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SeverStal said it views the transaction as a significant strategic opportunity to add complementary assets and scale to its existing U.S. business. "With Sparrows Point, SeverStal brings into its U.S. portfolio an asset with significant existing value as well as unlocked growth potential,” said Alexei Mordashov, CEO of SeverStal.
Sparrows Point— the only integrated producer of flat rolled steel on the U.S. East Coast—offers direct ocean access and proximity to a number of major U.S. railways and highways, assets that will allow SeverStal to improve its North American distribution channels and increase its geographic reach. The facility, which has an annual capacity of 3.6 million tonnes of crude steel, shipped 2.3 million tonnes of finished steel products in 2007. It is also a major North American supplier of tin mill products.
“This acquisition presents us with an opportunity to enhance productivity at Sparrows Point through our high standards of operational performance, and will benefit our existing U.S. businesses,” continued Mordashov. “We expect to realize synergies in Sparrows Point and with SNA that will fuel increased production and profitability. We remain committed to growth in North America and believe in the long-term promise of the U.S. market; we're confident that this acquisition will create value for our shareholders while strengthening our U.S. platform as a whole."
SeverStal expects the transaction to be accretive in year one based on current projections of costs and prices, and also is planning a five-year investment program that is expected to yield a number of business improvements and synergies. The company also expects substantial synergies with its current U.S. operations in Dearborn, Mich., and Columbus, Miss.
SeverStal and the United Steel Workers have agreed to enter into a collective bargaining agreement, reinforcing the company's ongoing relationship with organized labor.
The acquisition is subject to customary closing conditions, including approval by the United States Department of Justice, and is expected to close in 2Q08.
Merrill Lynch & Co. is acting as exclusive financial advisor to SeverStal and rendered a fairness opinion to the Board of Directors regarding this transaction. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel to SeverStal.
OAO SeverStal is an international steel producer with a listing on the Russian Trading System and the London Stock Exchange. Incorporated in 1993, the company focuses on high value added and unique niche products and has a successful track record of acquiring and integrating high-quality assets in North America and Europe. SeverStal owns mining assets in Russia, thus securing its supplies of raw materials. In 2007, SeverStal produced 17.5 million tonnes of steel. Revenues were $15.2 billion and EBITDA was $3.7 billion. EPS was $1.92.
