Steel Dynamics Inc. (SDI) has agreed to acquire from affiliates of Commercial Metals Company (CMC) the facilities and assets of CMC's former steel-joist manufacturing operations. When the purchase is completed, the joist manufacturing assets will become part of SDI's wholly owned subsidiary, New Millennium Building Systems. The transaction is expected to close by the end of October.
Earlier this year, CMC announced plans to exit from its joist business and began the process of closing down all its operations in the joist business. "With our purchase of these assets, New Millennium will become the nation's second largest provider of steel joists and decking," says Keith Busse, chairman and CEO of Steel Dynamics, in a release.
The purchase includes three joist-manufacturing plants that New Millennium intends to reopen and begin operating in the near future. They are located in Hope, Ark.; Fallon, Nev.; and Juarez, Mexico. The facilities will help expand the company’s business in the South and Southwestern United States.
"Although the non-residential construction markets that New Millennium serves remains weak this year, we believe the long-term prospects for this business are sound and, as a consumer of steel, the fabrication business is very complementary to our steel business. Our purchase of these assets from CMC will give New Millennium an opportunity to immediately begin implementing geographic expansion plans that have been on the back-burner during the economic crisis," Busse adds.
Additionally, the agreement includes the purchase of complementary assets, primarily production and material handling equipment, from the other plants that CMC closed.
SDI is paying $17 million to acquire CMC’s joist-making facilities and assets, and it estimates that the current average cost to build and equip a single new joist plant would be about $20 to $25 million.
Gary Heasley, executive vice president of SDI and president of New Millennium Building Systems, says, "The addition of these plants to the New Millennium network will allow us to efficiently reach markets we could not previously serve and will allow us to better serve our customers that have a nationwide footprint, such as major retailers, structural-steel fabricators, and design-build firms whose projects span the continent. Previously, our more limited regional coverage has made serving these accounts more challenging.
"With this transaction, we are buying hard assets and some of the intellectual property of the former business," Heasley adds. "We are not acquiring any ongoing operations. Because of current market conditions, we expect the re-staffing of the reopened plants to be gradual. We look forward to bringing jobs back to our plants' communities as the non-residential markets recover.
"Over time, we plan to upgrade the three plants that we're buying to streamline their operations. Some of the equipment we're acquiring from the idled CMC plants, as well as existing equipment from currently idled New Millennium facilities, will be redeployed to allow us to improve manufacturing capabilities and efficiencies in the remaining plants, while minimizing the need for new capital investment," Heasley says.