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Steel Dynamics to Acquire OmniSource
10/02/2007 - Steel Dynamics enters a definitive agreement to acquire OmniSource, one of North America’s largest scrap recycling companies, in a transaction valued at slightly more than $1 billion.
Steel Dynamics, Inc. (SDI) and OmniSource Corp. have executed a definitive agreement for Steel Dynamics’ acquisition of OmniSource, one of North America’s largest scrap recycling companies. The Boards of Directors of both companies unanimously approved the agreement.
Pursuant to the agreement, Steel Dynamics will acquire all outstanding OmniSource stock in a transaction valued at slightly more than $1 billion. OmniSource shareholders will receive 9.7 million shares of Steel Dynamics stock and $425 million in cash. The aggregate transaction value includes SDI’s assumption of certain liabilities, including net debt, which is expected to be approximately $210 million at closing.
According to SDI, OmniSource will operate as a wholly owned subsidiary, and will continue to focus on the ferrous and nonferrous scrap processing, brokerage, and industrial scrap management needs of its customers. OmniSource President and CEO Danny Rifkin will join the SDI management team as an Executive Vice President of SDI’s newly formed recycled metals platform. He will continue to lead the OmniSource subsidiary as President and Chief Operating Officer, and he will also be named to SDI’s Board of Directors.
SDI’s existing scrap operations in Virginia and Tennessee will be consolidated into OmniSource, as will its planned scrap-processing facility in Indianapolis, Ind. The company expects the acquisition to result in synergies of approximately $15 million per year.
“This acquisition creates a significant new business platform for SDI and represents a quantum leap as it would regard strategic expansion into the steel scrap and recycled metals sector, which is an important element of our overall growth plan,” commented SDI Chairman and CEO Keith Busse. “Aside from the fact that scrap is a critical resource for our steelmaking operations, and Omni has historically been one of our largest suppliers, this acquisition opens the door for further profitable growth in a sector of increasing relevance on a global scale. OmniSource is one of the premier, if not the premier organization in both the ferrous and non-ferrous scrap industries, and has demonstrated its ability to successfully grow its business.
“When considered in conjunction with SDI’s recently announced mining and minerals projects in the State of Minnesota, Steel Dynamics will become the only domestic steelmaker to have a significant presence in both the virgin iron ore and ferrous recycling markets. These initiatives are expected to play a significant role in SDI’s future steelmaking growth,” Busse said.
SDI expects to close the transaction, which is subject only to regulatory approval, in November 2007.
Steel Dynamics, Inc. is the fifth-largest producer of carbon steel in the U.S, producing steel from recycled steel scrap in five electric-arc-furnace minimills. The company shipped 4.7 million tons in 2006 to generate revenues of $3.2 billion. Products include flat rolled steel, wide-flange beams, rails, SBQ bars, merchant bars, and specialty shapes. The company also operates five plants that produce fabricated steel building products. The company operates in the eastern U.S. and employs approximately 3900 people.
OmniSource Corp., a privately held company based in Fort Wayne, Ind., is a leading North American metal recycling company. Revenues of $2.3 billion for the fiscal year ended September 30, 2006, were generated from shipments of approximately 5.3 million tons of ferrous scrap and almost 900 million pounds of nonferrous metals. The company employs 2100 people in 42 locations across the eastern U.S. and Canada.
Morgan Stanley served as financial advisor to Steel Dynamics and legal advice was provided by McDermott Will & Emery and Haller & Colvin. Eastman Smith served as legal counsel for OmniSource.
