Steel Mills

U.S. Steel Kosice Sold to Chinese Mill?

September 25, 2017

Rumors were flying on Tuesday morning that U.S. Steel Corp. has agreed to sell its Kosice operations in Slovakia to China’s Hesteel.

The sale is expected to close in the coming weeks with Hesteel taking over operations at the beginning of the year, according to the Slovak Spectator. However, securing approval from anti-monopoly authorities in the European Union may delay the closing.

The Slovak unit will be sold for $1.4 billion, said the Spectator report. If true, analysts at Cowen Insight said, the valuation is extremely low, an undervaluation at “a multiple of just under four times” based on EBITDA for the last 12 months. Since U.S. Steel is not in imminent need of cash, it is more likely that the company would sell the Slovak unit for a more attractive price, said Cowen.

A memorandum of understanding was signed between the two companies in January, said the Slovak Spectator, but the sale was delayed in September.

U.S. Steel has made environmental updates at the steelworks, but most of the 1960s machinery is outdated and will need upgrading or replacement.

A spokesperson for U.S. Steel declined to comment on “rumors and unsubstantiated media reports.”

“USSK is an important part of United States Steel Corp. and has delivered strong results during difficult market conditions,” said a U.S. Steel spokeswoman. “United States Steel Corp. has received multiple expressions of interest in U.S. Steel Košice and holds a fiduciary responsibility to its shareholders to investigate every opportunity to improve the business. No decisions have been made at this time.”

Whether the reported sale is fact or speculation, the rumors caused U.S. Steel shares to rally on Tuesday morning.