U.S. Steel Corp. entered into a joint venture agreement to acquire a 49.9% interest in Big River Steel LLC for about US$700 million in cash, with an option to acquire the remaining 50.1% stake within the next four years.
Big River, which has an advanced flat-rolled steel mill in Arkansas, has an implied enterprise value of about US$2.33 billion, according to an Oct. 1 news release.
Big River recently announced a second phase expansion for the mill, which is expected to double its hot-rolled steel production capacity to 3.3 million tonnes annually.
U.S. Steel said the acquisition will position it to achieve up to US$1 billion in capital and operational cash improvements by 2022 as well as expand its capability and geographic presence to serve customers with high-tech, sustainable steel solutions.
The transaction is expected to increase the company's profitability due to Big River's low-cost position, highly variable-cost structure and low sustaining capital expenditure requirements.
U.S. Steel intends to increase its US$1.5 billion asset-backed lending facility to US$2 billion and draw on the upsized facility, which has been fully committed by Barclays Capital, to fund the acquisition.
The transaction is expected to close Oct. 31.
