Russian steel makers Evraz Group and TMK agreed on Friday to pay a combined $4.025 billion to acquire IPSCO’s North American plate and pipe businesses from Swedish steel firm SSAB.
Evraz, part-owned by billionaire Roman Abramovich, said it would pay $2.3 billion for IPSCO’s Canadian assets. It will also acquire the firm’s US pipe operations before selling them on to TMK, Russia’s largest steel pipe maker, for $1.7 billion. Evraz said in a statement it had entered a back-to-back agreement to sell certain US businesses to TMK and affiliates for $1.2 billion. It said it would transfer the remaining US operations for $500 million in 2009. Evraz said it would finance the acquisition by raising a bridge loan as well as a non-recourse term loan arranged at the acquired company level. “This transaction will further enhance Evraz’s existing North American presence in high value-added steel segments,” said Evraz Chairman and CEO Alexander Frolov.
Evraz has made two previous acquisitions in the United States in the last 18 months. Its $2.3 billion purchase of Oregon Steel Mills created the world’s largest rail producer and in December it agreed to pay $564.8 million for Delaware-based steel plate producer Claymont Steel Holdings. “This deal will increase our exposure to the attractive energy and infrastructure sectors throughout the region. We expect substantial synergies from the combination of IPSCO Canada and Evraz’s existing North American operations,” Frolov said.
Evraz’s London-traded stock was up 2.8% at 1020 GMT and TMK shares rose 2.6%. Shares in SSAB rose 6.2%. A sector analyst in Sweden said the price was in line with speculation about such an acquisition, but looked high in relation to profitability in the steel pipe sector as a whole. “ (SSAB’s) debt is going to come down, and that reduces one area of uncertainty related to the company,” a second Swedish analyst said. (Reuters)