AK Steel Corporation
) has signed a deal to buy Severstal North America's integrated
steelmaking assets based in Dearborn, MI, for $700 million in cash.
The acquisition will also include a cokemaking facility and
interests in three joint ventures that process flat-rolled steel
AK Steel is expected to close the buyout in the fourth quarter of
2014 subject to customary closing conditions and regulatory
approvals. The acquisition, which is supported by a fully committed
bridge financing facility from Credit Suisse, will be financed by
the company with a combination of debt and equity securities.
The acquisition will be beneficial to AK Steel in a number of ways.
The Dearborn plant is located nearby many of AK Steel's customers
and the plant's assets as well as other facilities complement AK
Steel's existing carbon steel operations. The company will get
access to highly modernized and upgraded steelmaking equipment and
facilities. The acquisition will enable AK Steel to increase its
profitability and operational efficiency.
AK Steel will also be able to attain cost synergies by saving
purchase, transportation and overhead costs. AK Steel expects costs
based synergies of around $50 million, with roughly $25 million
realized during the full year that follows the closing of the
acquisition. Like AK Steel, Dearborn plant produces hot and cold
rolled sheet and hot dip galvanized products, as well as other
flat-rolled steel products.
AK Steel plans to use all of Dearborn's production units. The plant
has the capacity of producing about 2.5 million tons of finished
steel per year. Once the acquisition is complete, AK Steel expects
its annual shipments to exceed 7.5 million tons.
AK Steel currently holds a Zacks Rank #3 (Hold).
Some other stocks worth considering in the steel and related
Olympic Steel Inc.
). All of them hold a Zacks Rank #2 (Buy).
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