AK Steel to Acquire Severstal's Dearborn Plant for $700M - Analyst Blog


AK Steel Corporation ( AKS ) 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 products.

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 industries include Olympic Steel Inc. ( ZEUS ), ThyssenKrupp AG ( TYEKF ) and NN Inc. ( NNBR ). All of them hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AKS , NNBR , ZEUS , TYEKF



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