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CMC to acquire four US rebar mills, 33 fabrication shops from Gerdau

Pittsburgh — Commercial Metals Co has reached a $600 million deal to acquire from Gerdau a large number of US fabrication shops and four of the company's steel mills in Jacksonville, Florida; Knoxville, Tennessee; Rancho Cucamonga, California; and Sayreville, New Jersey, it said Tuesday.

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The deal includes 33 fabrication shops and 2.8 million st/year of total raw steel production capacity at the four mills, which also collectively have 2.5 million st/year of rolling capacity.

The deal is expected to close before the end of 2018, CMC said in a statement.

The assets account for 23% of Gerdau's North American melt capacity.

The deal would leave Gerdau with three fabrication shops and give CMC 79 downstream fabrication facilities, according to an analyst note from Jefferies.

The sale would not take Gerdau out of the rebar market as it would still have the capability to produce it at several of its US facilities, according to a company spokesperson.

The acquisition could boost CMC's US rebar share to around 40% of US consumption, or roughly 50% of shipments. In addition, CMC's downstream fabrication facilities would grow from 46 to 79 post-acquisition.

CMC would look to optimize production synergies in markets served by both CMC mills and newly acquired Gerdau facilities, the company said on a conference call Tuesday.

With the acquisition of the Jacksonville facility, CMC could also add wire rod to its product portfolio.

The mills in Knoxville, Rancho Cucamonga and Sayreville produce only rebar.

According to an analyst note from KeyBanc, the acquisition would give CMC 35%-40% of pro forma 2018 US rebar production capacity, doubling its capabilities and rendering it second only to Nucor.

The long-rumored deal would shift the balance of power in the US rebar market.

One Midwest rebar buyer deemed CMC "the new bully on the block."

--Joe Eckelman,

--Edited by Jason Lindquist,