Steel Mills
U.S. Steel Takes First Step in Acquisition of Big River Steel
Written by Sandy Williams
October 1, 2019
U.S. Steel announced today it will acquire a 49.9 percent ownership interest in Big River Steel at a purchase price of $700 million with the intent to acquire the remaining shares within the next four years.
U.S. Steel has committed financing to execute the transaction. The implied enterprise value of Big River is approximately $2.325 billion and includes the fully-funded and under construction Phase IIA expansion. The agreement builds in options for Big River Steel’s original owners related to the future ownership makeup of Big River Steel if U.S. Steel chooses not to exercise its option. U.S Steel President and CEO David Burritt emphasized during a conference call Tuesday morning that his company fully intends to complete the total acquisition of BRS.
“Our new partnership with Big River is designed to accelerate our strategy to offer our customers the ‘best of both’ by bringing together the capabilities of integrated and minimill steel production,” said Burritt. “Big River operates the most advanced, state-of-the-art and sustainable mill in North America, and our investment would ultimately strengthen our competitive positioning in highly strategic steel-end markets, creating an unmatched value proposition for our stakeholders.”
U.S. Steel says the partnership and eventual acquisition will strengthen its competitive position in high-margin end-markets, including energy, infrastructure and automotive. Big River’s geographical location will also give U.S. Steel greater access to domestic and Mexican markets.
”The investment in Big River, coupled with our announced investments at Mon Valley Works and Gary Works, would ultimately position U.S. Steel with three core market-leading, differentiated and technologically advanced assets that will enable us to compete with anyone, anywhere for generations to come,” said Burritt. During an interview with CNBC, Burritt added that U.S. Steel will cut back on $200 million to $250 million in improvements that are scheduled at its other mills. The company also plans on looking at monetarizing its excess taconite pellets.
“I am extraordinarily optimistic about the future,” said Burritt, adding that he expects the United States to achieve more free trade, a USMCA agreement, resolution of the China trade war and an infrastructure bill.
Burritt was confident about achieving total acquisition of Big River Steel: “It will be a beautiful marriage ultimately.”
Big River Steel’s Flex Mill, the world’s only LEED-certified steel mill, began production in early 2017 and has proven itself as a premier steel producer in terms of profitability, product quality, employee productivity and environmental sustainability. The Phase II-A expansion is expected to double the mill’s hot-rolled steel production capacity to 3.3 million tons annually making it one of the largest EAF-based mills in North America. BRS operates without a union and is known for its low-cost operation, culture of team building and streamlined management style.
“Five years ago we started Big River Steel with five employees with BIG ideas and today we are partnering with a company started by Andrew Carnegie 118 years ago,” said David Stickler, chief executive officer of Big River Steel. “As partners with U. S. Steel, we intend to prove to the world that the best way to make steel is by combining the best of traditional integrated steelmaking with the best of electric arc furnace minimill steelmaking.”
Completion of the transaction is anticipated on Oct. 31, 2019, subject to customary closing conditions.
Sandy Williams
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