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Severstal NA on sales block

Keywords: Tags  Severstal, Severstal North America, Severstal NA, Alexey Mordashov, mergers, acquisitions, Dearborn plant, Columbus plant U.S. Steel


CHICAGO — Severstal North America Inc. is up for sale after a bidding process officially kicked off last week, capping months of speculation that the steelmaker might be on the auction block, sources familiar with the matter told AMM.

Bids for both of Dearborn, Mich.-based Severstal NA’s facilities—an integrated mill in Dearborn and an electric-arc (EF) furnace operation in Columbus, Miss.—were reported to be in the mid-$2-billion range, although some offers were said to be significantly lower, market sources told AMM.

Severstal declined to comment.

Steelmakers in North America, Brazil and Japan, as well as at least one private equity firm, are involved—or are expected to become involved—in the bidding process, the market sources said.

The official deadline for bids was May 8 but has been extended for some bidders or potential bidders, market sources said. Severstal aims to choose two or three finalists within the next two weeks and a winning bid within about two months, they said, while closing could take an additional six months.

Pittsburgh-based U.S. Steel Corp. and Brazil’s Cia. Siderúrgica Nacional SA (CSN) are said to be the front-runners among the bidders for both facilities.

U.S. Steel does not comment on "rumor or speculation," a company spokeswoman said May 12.

CSN also declined to comment.

Additionally, a joint effort between West Chester, Ohio-based AK Steel Corp. and Fort Wayne, Ind.-based Steel Dynamics Inc. (SDI) was said by market sources to be in the mix. While the structure of the joint entity wasn’t immediately clear, AK apparently is interested in the Dearborn facility while SDI is eyeing the Columbus plant, they added.

AK Steel declined to comment, while SDI did not return a request for comment.

But not all bids are expected to be for both facilities, market sources said.

Charlotte, N.C.-based Nucor Corp. and Luxembourg-based Ternium SA, for example, were said to be interested in Severstal’s Columbus plant, while Japan’s JFE Steel Corp. is expected to place a bid this week but perhaps only for the Dearborn facility.

JFE was said to be considering the Dearborn facility to boost its exposure to the North American automotive market. The Japanese steelmaker also was said to be mulling investing in a continuous annealing line for the plant.

Nucor, Ternium and JFE did not return requests for comment.

Private equity firms also were said to have expressed interest in Severstal NA, part of Russian steelmaker OAO Severstal, although most didn’t move forward with bids. Los Angeles-based Platinum Equity LLC, for example, was said to have dropped out of the bidding process, while Toronto-based Brookfield Asset Management Inc. was said to be still in the running. Brookfield declined to comment.

Some sources indicated that Alexey Mordashov, chief executive officer of Moscow-based OAO Severstal, might be under political pressure to sell the North American facilities. But others said the sale has been in the works for at least eight months, before turmoil in Ukraine erupted into tensions between the United States, Europe and Russia.

"After a successful reorganization of its American assets that led to the Dearborn and Columbus plants starting to show some of the best results in the U.S. steel market, Severstal started to get offers ... from some investors (interested in buying the facilities)," a source with knowledge of the situation said.

"However, the decision on if Severstal will change the format of its presence in the U.S. has not been taken yet. It will fully depend on the financial gain (of a possible sale)," the source said. "(The) U.S. market is still interesting for Severstal. The company started to consider various strategic options for (the North American operations) in September, so there is no connection between the consideration of a potential sale and the (recent) political events."

Market sources generally agreed that the Columbus plant—completed in 2007 for approximately $980 million—would be a good investment. Some, however, questioned whether Dearborn, the former Rouge Steel Co., might see more interest in its cold mill and finishing facilities than in its steelmaking capabilities.

Severstal in 2011 completed a $740-million revamp of Dearborn, including a cold mill and hot-dipped galvanizing line that makes exposed automotive products, according to its website.

But others noted that Dearborn’s "C" blast furnace was rebuilt in 2007 and is now among the most reliable furnaces in North America. They pointed specifically to Dearborn’s strong performance in recent months (amm.com, April 30), a period when other Great Lakes integrated producers struggled with production or supply chain problems (amm.com, April 17). If the Dearborn facility has an issue it is slab short, a problem that could be addressed by an acquisitive steelmaker with spare slab capacity, the market sources said.

Severstal’s Dearborn plant has an annual capacity of 3.6 million net tons of hot-rolled steel, 2.1 million tons of cold-rolled and 1.1 million tons of galvanized and galvannealed sheet, according to the company’s website. Columbus’ annual capacity stands at 3.4 million tons of hot-rolled steel, 1.5 million tons of cold-rolled and 1.1 million tons of galvanized and galvannealed sheet.

Nadia Popova, a Moscow-based reporter at AMM sister publication Metal Bulletin, contributed to this story.

 


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