Steel Dynamics to acquire CSN Heartland flat-rolled operations

Steel Dynamics Inc., headquartered in Fort Wayne, Indiana, has announced that it has entered into a definitive agreement to acquire Companhia Siderurgica Nacional LLC (Heartland) from CSN Steel, S.L.U., a wholly owned subsidiary of Companhia Siderurgica Nacional and a steelmaking company headquartered in Brazil. 

Heartland, Terre Haute, Indiana, produces various types of higher-margin, flat-rolled steel by further processing hot roll coils into pickle and oil, cold roll and galvanized products. The company’s 220 employees will remain with the acquired business.

Steel Dynamics has agreed to purchase Heartland for $400 million in cash inclusive of $60 million of normalized working capital, subject to customary transaction purchase price adjustments. The company says the purchase price approximates current replacement value. The transaction is expected to be accretive to near-term earnings and cash flow per share, Steel Dynamics says.

The acquisition will expand Steel Dynamics’ annual flat roll steel shipping capacity to 8.4 million tons and total shipping capability to 12.4 million tons. The additional exposure to lighter-gauge and greater width flat roll steel offerings will broaden the company’s value-added product portfolio, enhancing Steel Dynamics’ position as a leading North American steel producer, according to the company.

“The acquisition of Heartland represents a step in the continuation of our growth strategy,” says Mark D. Millett, CEO of Steel Dynamics. “It levers our core strengths, and at the same time fulfills our initiatives to further increase value-added product and market diversification. We look forward to welcoming the Heartland employees and customers into the Steel Dynamics family, and working with them to drive future growth and success.

“We have positioned our capital structure and organizational framework for growth,” Millett continues, “and we believe this acquisition will result in numerous future earnings benefits both to Heartland’s current operations and to our Midwest flat-roll operations. In combination with our current operations, Heartland brings a tremendous amount of operating flexibility and optionality. As a part of our broader business platform, Heartland is expected to provide numerous synergies with our existing operations, and we look forward to levering these opportunities in the future.”

Heartland has the annual capability to produce 1 million tons of cold-rolled steel, with galvanizing capacity of 360,000 tons. Heartland is comprised of a continuous pickle line, a cold mill and a galvanizing line. The equipment has been upgraded, well-maintained and is in excellent operating condition, according to Steel Dynamics. Historically, Heartland has been operated at low utilization, primarily focusing on galvanized products. Future plans are to use the full capacity of the facility, providing high-quality cold roll, pickle and oil and galvanized products. The geographic proximity to Steel Dynamics’ other flat-rolled operations and certain fabrication locations provides opportunities related to logistics and production efficiencies throughout the supply chain and customer network.

The transaction has received all required corporate approvals from the respective parties. The transaction is only subject to customary conditions and receipt of regulatory approvals. Steel Dynamics says it expects to obtain all necessary regulatory approvals and complete the transaction before the end of the third quarter 2018. The purchase price will be paid in cash from available reserves, and is subject to customary working capital adjustments dependent upon the exact date of closing.    

Steel Dynamics is one of the largest domestic steel producers and metals recyclers in the United States based on estimated annual steelmaking and metals recycling capability, with facilities located throughout the United States and in Mexico. The company produces steel products, including hot-rolled, cold-rolled and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold-finished steel, merchant bar products, specialty steel sections and steel joists and deck. In addition, the company produces liquid pig iron and processes and sells ferrous and nonferrous scrap.