Nucor Corp. Looks to Buy Birmingham Steel

Nucor Corp., Charlotte, N.C., has offered to purchase most of the assets of Birmingham Steel Corp., Birmingham, Ala., for $500 million in cash.

The offer specifically includes the four Birmingham mills in Birmingham, Ala.; Jackson, Miss.; Kankakee, Ill., and Seattle.

In a letter sent in mid-February to Birmingham Steel, Dan DiMicco, Nucor’s vice chairman, president and CEO, said the proposed transaction is not subject to any financing contingencies.

"Nucor is prepared to move quickly to complete the transaction on a negotiated basis. Following its completion, all currently active Birmingham Steel manufacturing facilities will continue to operate on a business-as-usual basis," wrote DiMicco.

In a follow-up conference call held shortly after the letter was sent, DiMicco commented that “there is no time limit to the offer, but we believe it is in everybody’s best interests to move forward.”

DiMicco also bluntly remarked that former Nucor executive John Correnti, current CEO of Birmingham Steel, would not be coming back to Nucor as part of the deal. “As far as John being part of our organization structure going forward, the answer would be no to that,” DiMicco said during the conference call.

Birmingham Steel’s Cleveland facility, which is under contract to be sold by Birmingham, will not be part of the acquisition. The status of the closed Memphis melt shop has also not been specifically addressed by Nucor, either in its letter or in the conference call, except that it is not among the assets Nucor would specifically want as part of its initial offer.

Nucor’s offer to acquire Birmingham Steel operations follows Nucor’s acquisition of Trico Steel in Decatur, Ala., for $120 million late last year. Also last year, Birmingham Steel sold its Cartersville, Ga., mill to the Brazilian firm Gerdau Steel’s AmeriSteel subsidiary, Tampa, Fla.

DiMicco estimated the combined steel finishing capacity at the four Birmingham mills at two million tons per year. He said that due to Birmingham’s cash-poor position over the last couple of years, Nucor would likely have to make some capital investments to upgrade the plants.

In terms of how the new facilities would fit in with Nucor’s product mix, DiMicco said, “there is good compatibility between Nucor and Birmingham’s bar mill operations. It would expand our product offerings to our customer base, particularly in re-bar, where Birmingham is a much larger player than we are.”

The Nucor CEO also noted that he did not see any further scrap buying economies of scale coming from the deal. “I don’t think we can save significantly beyond what we already are. We’re already buying more than one million tons per year of scrap.”

He added that he does not see any anti-trust barriers to the deal, even though it will give Nucor a significant amount of steelmaking capacity in the southeastern U.S. “Our industry is extremely fragmented, [and] with or without this deal it will remain fragmented. We don’t believe there will be any anti-trust issues.”

Nucor also announced that its Bar Mill Group will spend over $200 million on capital projects over the next three years.

The projects, which are part of the Nucor Bar Group strategic plan, consist of: a modernization of the rolling mill at the Nucor Steel Division in Norfolk, Nebraska; a new melt shop at the Nucor Steel Division in Jewett, Texas; and a new reheat furnace and finishing end at the Nucor Steel Division in Darlington, S.C.

With this new equipment, Nucor's employees will be able to accelerate ongoing programs to reduce operational costs, increase production yields, and improve overall product quality. "We are very excited about these new projects in the Bar Mill Group," said Mike Parrish, Nucor executive vice president. "Our people are the key to Nucor's success and this equipment will help them achieve their goals. These projects will enable us to maintain a low cost position and to stay on track for continual improvement."