WEST CHESTER, Ohio,
July 21, 2014 /PRNewswire/ -- AK
Steel (NYSE: AKS) said today that it has signed an agreement to
acquire Severstal North America's integrated steelmaking assets
located in Dearborn, Michigan for
$700 million in cash. The
acquisition also includes a cokemaking facility and interests in
three joint ventures that process flat-rolled steel products.
Summary of Benefits:
- Increased scale enhances company's ability to better serve
customers
- Highly modernized and upgraded steelmaking equipment and
facilities
- Additional operational flexibility
- Significant cost-based synergies
- Immediately accretive and credit-enhancing
The Dearborn plant, which
produces high-quality, flat-rolled steels primarily for the
automotive, construction and appliance markets, completed a
large-scale modernization campaign in 2011. During the
campaign, major capital was invested in new state-of-the-art
equipment and various operational improvements. The
Dearborn facility is strategically
located in close proximity to many of AK Steel's customers, and the
assets at the steel plant and the other acquired facilities
complement AK Steel's existing carbon steel operations.
"The acquisition of Severstal Dearborn allows us to grow our
business profitability and better serve our customers," said
James L. Wainscott, Chairman,
President and CEO of AK Steel. "It furthers our automotive
strategy and strengthens our carbon steelmaking footprint. It
also combines great employees at Dearborn with great employees at AK Steel to
strengthen a terrific company that is better able to compete, and
to win, in the global steel marketplace. We welcome the
employees of Dearborn to AK
Steel."
The acquisition also increases AK Steel's operational
flexibility and enables significant cost-based synergies. "In
addition to operational and productivity enhancements, the
acquisition will create purchasing, transportation and overhead
cost savings," said Mr. Wainscott. "We expect the transaction
to be immediately accretive to our earnings and create significant
long-term value for AK Steel, our employees, customers and
shareholders." The company anticipates annual cost-based
synergies of approximately $50
million, with approximately $25
million realized in the first full year following the
closing of the acquisition.
Dearborn's blast furnace, which
was rebuilt in 2007, is among the most efficient and productive
blast furnaces in the world for its size. The plant also
began operating a new pickle line tandem cold mill and a new hot
dip galvanizing line in 2011. Similar to AK Steel's existing
carbon steel operations, the Dearborn plant produces hot and cold rolled
sheet and hot dip galvanized products, as well as other flat-rolled
steel products. The plant employs approximately 1,400 people
and is capable of producing about 2.5 million tons of finished
steel per year. Upon completion of the acquisition, AK
Steel's annual shipments are expected to exceed 7.5 million
tons. AK Steel said that it intends to utilize all of
Dearborn's production units, and
the company has no plans to cease operations at any of its current
steelmaking or steel finishing facilities.
AK Steel intends to finance the acquisition with a prudent
combination of debt and equity securities and remains committed to
enhancing its credit profile. The acquisition is supported by a
fully committed bridge financing facility from Credit
Suisse.
The transaction is subject to customary closing conditions and
regulatory approvals. Subject to the conclusion of the
regulatory review, the closing is expected to occur in the fourth
quarter of 2014.
Credit Suisse is acting as financial advisor to AK Steel and
Weil, Gotshal & Manges LLP is serving as its legal
advisor.
AK Steel Web-Cast Scheduled
AK Steel said that it will provide live listening access on the
Internet to a call with analysts and investors it has scheduled for
11:00 a.m. ET on Monday, July 21, 2014 to discuss the acquisition
detailed in this news release and its anticipated impact on the
company. Access to the web-cast will be available on the
company's web-site at www.aksteel.com. The web-cast will be
archived on the company's web-site until Monday, July 28, 2014 and will be accessible at
aksteel.com.
Forward-Looking Statements
The statements in this release with respect to future results
reflect management's estimates and beliefs and are intended to be,
and hereby are identified as "forward-looking statements" for
purposes of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "believes," "intends," "plans," "estimates" and
other similar references to future periods typically identify such
forward-looking statements.
The company cautions readers that such forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those currently expected by
management, including that the acquisition of Severstal Dearborn
may not be consummated, or may not be consummated in a timely
manner; that regulatory approval not be obtained or may only be
obtained subject to conditions that are not anticipated; that
Severstal Dearborn will not be integrated successfully into AK
Steel following the consummation of the acquisition; and that cost
savings, synergies, accretion to earnings, increased shipments and
other anticipated benefits and opportunities from the acquisition
may not be fully realized or may take longer to realize than
expected. In addition, our results and financial condition
and any benefits from the acquisition, if consummated, could be
adversely affected by reduced selling prices, shipments and profits
associated with a highly competitive industry with excess capacity;
changes in the cost of raw materials and energy; the company's
significant amount of debt and other obligations; severe financial
hardship or bankruptcy of one or more of the company's major
customers; reduced demand in key product markets due to competition
from alternatives to steel or other factors; increased global steel
production and imports; excess inventory of raw materials; supply
chain disruptions or poor quality of raw materials; production
disruption or reduced production levels; the company's healthcare
and pension obligations; not timely reaching new labor agreements;
major litigation, arbitrations, environmental issues and other
contingencies; regulatory compliance and changes; climate change
and greenhouse gas emission limitations; conditions in the
financial, credit, capital and banking markets; the company's use
of derivative contracts to hedge commodity pricing volatility; the
value of the company's net deferred tax assets; inability to fully
realize benefits of long-term cost savings and margin enhancement
initiatives; lower quantities, quality or yield of estimated coal
reserves of AK Coal; increased governmental regulation of mining
activities; inability to hire or retain skilled labor and
experienced manufacturing and mining managers; and IT security
threats and sophisticated cybercrime; as well as those risks and
uncertainties discussed in the company's Annual Report on Form 10-K
for the year ended December 31, 2013,
as updated in subsequent Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed with or furnished to the Securities and
Exchange Commission. Except as required by law, the company
disclaims any obligation to update any forward-looking statements
to reflect future developments or events.
AK Steel
AK Steel is a world leader in the production
of flat-rolled carbon, stainless and electrical steel products,
primarily for automotive, infrastructure and manufacturing,
construction and electrical power generation and distribution
markets. The company's AK Tube subsidiary produces carbon and
stainless electric resistance welded tubular steel products for
truck, automotive and other markets. Headquartered in
West Chester, Ohio (Greater Cincinnati), the company employs
approximately 6,500 men and women at seven steel plants and two
tube manufacturing plants across four states: Indiana, Kentucky, Ohio and Pennsylvania. The company also
has interests in iron ore through its Magnetation LLC joint venture
and in metallurgical coal through its AK Coal subsidiary.
Additional information about AK Steel is available at
www.aksteel.com.
SOURCE AK Steel