AK Steel, West Chester, Ohio, has signed an agreement to acquire Severstal North America’s integrated steelmaking assets located in Dearborn, Mich., for $700 million in cash. The acquisition also includes a cokemaking facility and interests in three joint ventures that process flat-rolled steel products. The Dearborn plant produces high-quality, flat-rolled steels, primarily for the automotive, construction, and appliance markets. A large-scale modernization campaign was completed in 2011. During the campaign, major capital was invested in new state-of-the-art equipment and various operational improvements.
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 1400 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.
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 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.
