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U.S. Steel taking ownership stake in Big River Steel

2019-10-03

U.S. Steel Corp. will take a 49.9% ownership stake in Big River Steel with an option to acquire the remaining 50.1% of the Arkansas company within four years, the Pittsburgh-based steelmaker announced Tuesday.

The deal would give U.S. Steel added steel roll manufacturing capacity with the all the bells and whistles of a new, state-of-the-art minimill.

In a conference call with investors, U.S. Steel President and CEO David B. Burritt called Big River the “newest, most technologically advanced flat rolled mill in North America.”

“This transaction turns us into a more nimble and responsive company for our customers,” he said. “You can build something or you can or buy something. If we buy something, we can get it more quickly.”

The Big River investment, coupled with U.S. Steel’s previously announced upgrades at Mon Valley Works in Braddock and at Gary Works in Indiana, will position the manufacturer “to compete with anyone, anywhere for generations to come,” Mr. Burritt said in a prepared statement.

This spring, the Pittsburgh company announced plans to construct a new caster and rolling mill at the Edgar Thomson plant in Braddock, part of a push to help the historic steelmaker bring its operations in line with the latest technology.

Over the last year or so, the steel industry has been bolstered by tariffs imposed by the Trump administration on imports of steel from China and other countries. But uneven demand from the manufacturing sector and lower steel prices have slowed some of that momentum.

Tuesday’s announcement signals that U.S. Steel is still investing in new opportunities.

Big River Steel, a $1.3 billion minimill that began operations in early 2017 about 50 miles north of Memphis, is the only steel producer to be LEED certified. That certification requires certain green building standards involving things like energy systems and water use.

The mill is undergoing a $1.2 billion expansion, which will double the plant’s hot rolled steel production to 3.3 million tons annually. 

The first step in the acquisition of the Osceola-based steel company will be paid for with $700 million from U.S. Steel’s existing $1.5 billion lending facility, which will be increased to $2 billion to finance the transaction. The deal is expected to close Oct. 31 subject to customary closing conditions.

Big River, which employs about 550 people, produces a range of flat rolled products used in the automotive, energy, construction and agricultural industries.

The implied value of the Big River deal is approximately $2.32 billion, which includes a fully funded expansion underway at the plant that will double its hot rolled steel production to 3.3 million tons annually.

U.S. Steel’s share price, which was down 60% since Nov. 6 — rose in early trading Tuesday with announcement of the Big River acquisition. By mid-afternoon, shares were up almost 6 percent.

The deal positions U.S. Steel to achieve as much as $1 billion in capital and operational cash improvements by 2022, the company said.

Source: Pittsburgh Post-Gazette