CHICAGO — Seamless tube and cold-finished bar producer Optima Specialty Steel Inc. has inked a deal to acquire special bar quality (SBQ) and merchant bar quality steel producer Kentucky Electric Steel LLC (KES) for $112.5 million in cash, according to KES parent ALJ Regional Holdings Inc.
The deal will leave the company with $51 million in cash on hand following the repayment of debt, transaction-related expenses and other costs, Ashland, Ky.-based ALJ said Monday.
The merger agreement—which remains subject to shareholder and regulatory approval, as well as the arrangement of financing by Miami-based Optima—is expected to close in December, the companies said separately Monday. The deal could be terminated if Optima doesn’t obtain financing or if it isn’t consummated by Feb. 28, ALJ said.
The deal was unanimously approved by ALJ’s board, it said, noting that it could seek to use the proceeds of the sale to fund an acquisition. However, no specific targets have been chosen. The company said it would have no operations and no material assets, other than cash from the transaction, following the closing.
According to the deal, Optima will recognize the terms of a labor contract negotiated on May 4, 2008, between KES and the United Steelworkers union, ALJ said.
"It has been extremely gratifying to have taken a mill that was closed, reopen it and make it into a world-class provider of SBQ and (merchant bar quality) steel products," ALJ chief executive officer John Scheel said in a statement.
KES, which has been a supplier to Optima, should complement the company’s portfolio, Optima said. Late last year, Optima acquired Hammond, Ind.-based cold-finished bar producer Niagara LaSalle Corp., merging it with its South Lyon, Mich.-based Michigan Seamless Tube LLC unit (amm.com, Dec. 13).
"KES fits perfectly into Optima Specialty Steel’s long-term strategy of building a leading specialty steel producer that delivers the best steel products to our customers," Optima president and chief executive officer Kevin Stevick said in a statement.
Optima parent Optima Acquisitions LLC has holdings in steel, ferroalloys, mining, real estate and other industries. Its holdings also include Warren Steel Holdings LLC, Steel Rolling Holdings Inc., CC Metals & Alloys LLC, Felman Production Inc. and Felman Trading Inc., the company said.