AK Steel in Mansfield, Ohio (Photo by Tom Hart/thart2009)
Russian steelmaker OAO Severstal has agreed to sell its North American subsidiaries to U.S. competitors Steel Dynamics Inc. and AK Steel Holding Corp. for a combined $2.3 billion in two separate transactions, the company said Monday.
The deal represents OAO Severstal’s exit from the U.S. market, which began in 2010 with the sale of factories in Illinois and Ohio, according to Bloomberg. Earlier this month, Severstal agreed to sell its coal unit to Canada’s Corsa Coal for $140 million.
Steel Dynamics, based in Fort Wayne, Ind., is purchasing Severstal Columbus LLC in Mississippi for $1.625 billion in a combination of cash and debt. AK Steel, based in West Chester, Pa., will get Severstal Dearborn in Michigan for $700 million in cash.
Talks about the sale began at the end of 2013, OAO Severstal said, before tensions between the U.S. and Russia escalated over Ukraine. The deal’s completion is subject to customary closing conditions. The board of each company has approved the transaction, which is expected to close at the end of 2014.
Skadden, Arps, Slate, Meagher & Flom represented OAO Severstal in the matter, while Weil, Gotshal & Manges advised AK Steel and Fort Wayne-based Barrett & McNagny counseled Steel Dynamics.
“The sale of Columbus and Dearborn unlocks substantial value to Severstal’s shareholders,” said Alexey Mordashov, chief executive officer of OAO Severstal in a statement.
James Wainscott, chief executive officer of AK Steel, said the acquisition of the Severstal Dearborn plant “furthers our automotive strategy and strengthens our carbon steelmaking footprint.” The factory, which was modernized in 2011, produces flat-rolled steel products that are used primarily in the automotive, appliance and construction industries. It employs 1,400 people and produces 2.5 million tons of finished steel annually. The company said it expects annual cost-based synergies of $50 million, with about $25 million in the first full year after closing.
Steel Dynamics said acquiring the Severstal Columbus plant will add 40 percent to its annual steel shipping capacity.
“The acquisition of Columbus represents a significant step in the continuation of our growth strategy,” said Steel Dynamics CEO Mark Millett in a statement. He added the deal “leverages our core strengths” and helps diversify the company. The Columbus plant is one of North America’s newest minimills producing galvanized sheets for construction, automotive, pipe and tube customers and employs 645 workers, according to a press release.
Skadden’s team for OAO Severstal includes antitrust partner Clifford Aronson; mergers and acquisitions partners Gary Cullen and Shilpi Gupta; labor and employment law partner John Furfaro and counsel Richard Kidd; environmental counsel Elizabeth Malone; executive compensation and benefits counsel Timothy Nelson; and tax partner Sarah Ralph. Associates on the deal were Lance Phillips and Mariska Richards.
Skadden has a long history of advising OAO Severstal on various corporate transactions and other legal work dating back to 2003, a firm spokeswoman said. Earlier this month, Skadden represented the company in its sale of Pennsylvania coal company PBS Coals to Corsa Coal. The firm had handled OAS Severstal’s acquisition of the former Rouge Steel plant that became Severstal Dearborn in 2004 out of a bankruptcy auction, as well as the greenfield project financing and joint venture arrangement in 2005 that ultimately became Severstal Columbus.
Weil’s legal team for AK Steel is composed of corporate partner Raymond Gietz; tax partner Helyn Goldstein; banking and finance partner Morgan Bale; capital markets partner Todd Chandler; private equity partner Joseph Verdesca; antitrust partner Laura Wilkinson; employment litigation counsel Lawrence Baer; and benefits partner Amy Rubin. Associates on the matter included Brian Drozda, Thomas Mastoras, Adam Mendelowitz, Melissa Meyrowitz, Naomi Munz, Andrew Pelzer and Joseph Santo.
Weil also advised AK Steel in a three-part offering of senior notes in 2012 and in a joint venture with Minnesota-based Magnetation in 2011, among other matters.
Steel Dynamics’ team at Barrett & McNagny includes M&A partner John Martin and corporate partner Robert Walters as lead counsel, with assistance from corporate partner Zachary Klutz, finance partner Richard Fox, benefits partners N. Thomas Horton and Thomas Markle, environmental partner David Steiner, employment partner Anthony Stites and tax partner Jeff Woenker. Associate Marcus Heminger also advised in the matter.
Barrett & McNagny, one of the largest law firms in Indiana, according to sister publication Texas Lawyer, has advised Steel Dynamics in many transactions going back to its startup in 2000, Stites said.