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US Steel gets 49.9% stake in JV with Big River, eyes acquisition

Highlights

US Steel gets 49.9% interest for about $700 million

Big River's implied value around $2.325 billion

US Steel has option to acquire remaining 50.1% within four years

  • Author
  • Joe Innace
  • Editor
  • James Burgess
  • Commodity
  • Metals

New York — Arkansas-based Big River Steel has found its suitor in US Steel after more than a year of chatter that it was on the merger and acquisition block.

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Pittsburgh-based US Steel has agreed to a joint venture partnership with Big River by purchasing a 49.9% stake for about $700 million in cash, according to a statement Tuesday. The deal includes an option for US Steel to acquire the remaining 50.1% within the next four years, and US Steel said it has committed financing to execute the transaction.

The implied enterprise value of Big River is around $2.325 billion, once its Phase II-A expansion is completed, which is already fully funded and under construction, the companies said.

The Phase II-A expansion is expected to double Big River's hot-rolled steel production capacity to 3.3 million st/year, "establishing it as one of the largest EAF-based flat-rolled mills in North America," US Steel said.

US Steel produces flat-rolled steel at its mills in Gary, Indiana; Mon Valley, outside of Pittsburgh; Great Lakes, Michigan and Granite City, Illinois. The company's total US flat-rolled segment steel production capability in 2018 was 17 million st. Raw steel output was 11.9 million st last year.

The newest flat-rolled mill in North America, Big River's LEED-certified, trademarked Flex Mill, is widely considered the most technically advanced in the US. It produces automotive and electrical steels, as well as other products for the energy, automotive, construction and agricultural markets.

"The investment in Big River, coupled with our announced investments at Mon Valley Works and Gary Works, would ultimately position US Steel with three core market-leading, differentiated and technologically advanced assets that will enable us to compete with anyone, anywhere, for generations to come," US Steel president and CEO David Burritt said.

"Each of these locations would be able to focus on the products that each facility is best designed to produce," he said. "As an organization, we will be nimbler, more resilient and our teams will be more efficient."

"After just over two years of operations, we have built a unique platform that features the most advanced technology in our industry, and the very finest steel technicians in the business," Big River CEO Dave Stickler said.

"We have always called ourselves a 'technology company that just happens to make steel,'" he said.

Closing of the transaction is anticipated on October 31, 2019, subject to satisfaction of customary closing conditions.

-- Joe Innace, joseph.innace@spglobal.com

-- Edited by James Burgess, newsdesk@spglobal.com

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