NEW YORK AK Steel Corp. expects to win U.S. Justice Department approval for its proposed $700-million acquisition of OAO Severstals integrated mill in Dearborn, Mich., because the deal would not give the company an overly large share of the automotive steel market, a company executive said.
"We have competing products, especially with aluminum now. ... We have competitors: U.S. Steel (Corp.), ArcelorMittal (SA), Nucor (Corp.), Steel Dynamics (Inc.). And you have imports. Imports are still 20-plus percent of our market, have been forever," chief financial officer Roger K. Newport told analysts and investors at Jefferies LLCs 10th annual Global Industrials Conference in New York. "Youve got plenty of competing markets and suppliers out there."
AK Steels automotive steel capacity will rise to about 8 million tons annually with the Dearborn deal, Newport said. Other large suppliers include Fort Wayne, Ind.-based Steel Dynamics with its parallel acquisition of Severstals Columbus, Miss., mini-mill, Charlotte, N.C.-based Nucor and Luxembourg-based ArcelorMittal.
"Relatively speaking, its not like were becoming that big. Time will tell, but Id be surprised" if substantive antitrust obstacles arose, he said. "But ... it is a government review, and I dont know what their perspective will be."
Although the West Chester, Ohio-based steelmaker recently submitted paperwork for the initial antitrust review, Newport declined to specify the exact date of the submission, calling the timing sensitive and citing Justice Department rules.
AK Steel, which expects the transaction to be completed as early as the third quarter or sometime in the fourth quarter of this year, had said previously that it likely would finance the deal with a mix of 60 percent debt and 40 percent equity, but Newport said the exact mix would "depend on the market at the time we close the deal."
Newport criticized the decision of Standard & Poors Ratings Services to place AK Steel on a negative credit watch following the announcement of the Severstal deal, calling the move disappointing but unsurprising. He said AK Steel expects the Dearborn deal to enhance the companys credit profile (amm.com, July 21).
However, concerns have surfaced questioning AK Steels ability to finance the deal (amm.com, July 21).