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Steel Dynamics Comments on Industry Consolidation Activity

04/27/2007 - Steel Dynamics issues statement to clarify its position regarding recent consolidation activity in the U.S. metals industry.

Steel Dynamics issued a statement to clarify its position regarding recent consolidation activity in the U.S. metals industry.
 
Issued in response to inquiries and comments recently made in the press regarding M&A activity, SDI stated that it is not currently in talks concerning, nor does it have any immediate plans to involve itself in, any of the potential primary-steelmaking consolidation transactions that have recently been the focus of interest in the financial press.
 
"SDI is a growth company that has always prudently evaluated growth opportunities whether they are organic or by acquisition," said Keith Busse, Chairman and CEO of Steel Dynamics. "We believe that some of the multiples being paid, offered, or suggested for certain steelmaking assets may not represent the best values or alternatives for SDI shareholders. Organic or greenfield growth in certain sectors (expanding existing SDI facilities, or building and operating new, more cost-effective operations) may well be a better alternative.
 
"Since our start-up in 1996, Steel Dynamics has achieved a compound annual growth rate of over 20% and has consistently demonstrated some of the best operating and financial metrics among U.S. steelmakers. To a large extent, our growth has resulted from the successful construction and operation of new, efficient steelmaking operations. We have looked at many M&A opportunities over the past few years and have sought to pursue relatively few. The acquisitions we have made in recent years have been at reasonable valuations and are providing strong returns on invested capital.
 
"Steel Dynamics continues to be interested in pursuing growth at a reasonable price, balancing the additional premium that may be required by an acquisition against the cost of internal growth project opportunities. Our management team, which we regard as one of the industry's strongest in terms of technical, commercial, and entrepreneurial skills, will continue to look at opportunities that make sense for the company, and thus, our shareholders. Each opportunity will be evaluated on its own merits.
 
"With respect to SDI's tolerance for financial leverage, it has not been our practice to over-lever our company, nor do we intend to do so in the future. Through disciplined growth, our debt-to-capitalization ratio has declined markedly over the past few years. SDI's balance sheet and capital structure depict an extremely strong   company with great financial flexibility. While we are in a strong position to undertake various projects to foster further growth, we would only expect to proceed with projects or acquisitions that are prudent from a financial and business operations perspective," Busse said.