U.S. Steel set to buy rest of Big River

Expansions
Dec 09, 2020
Andrew Moreau

U.S. Steel announced Tuesday that it will invest $774 million in cash to acquire the remaining equity in Big River Steel, which operates one of the nation's most innovative mini mills near Osceola in Mississippi County.

The move completes U.S. Steel's previously announced plans to take over the operations of Big River. In October, U.S. Steel bought 49.9% of Big River for $700 million and had options to buy the entire company. The total cost for the purchase of Big River will be nearly $1.5 billion.

Big River's plant in Mississippi County is "North America's most advanced flat-rolled mini mill," U.S. Steel said in the announcement.

"For months, I've said that we can't get to the future fast enough," David Burritt, U.S. Steel's president and chief executive officer, said in a statement Tuesday. "Today, I can say the future is now."

The company said the transaction, which is scheduled to close in the first quarter, combines the "best of both worlds" by joining the integrated high-strength steel manufacturing operations of U.S. Steel with the more flexible and innovative production lines offered by Big River Steel.

U.S. Steel, publicly traded on the New York Stock Exchange, announced the deal before the stock market opened. Investors gave a warm greeting -- the company's stock gained 13% and closed at $19.47 on Tuesday.

"This morning's announcement is an exciting next step in transforming U.S. Steel into a world-competitive, best-of-both steel producer," Kevin Lewis, vice president of investor relations, told analysts on a conference call Tuesday. "The time is right to take the next step in executing our strategy and acquiring the remaining equity of Big River."

"I'm extremely proud of what our Big River Steel team has achieved in building the most technologically advanced and only LEED certified steel mill, and I'm equally proud that we are joining a company that not only values our many accomplishments, but shares our vision as well," Big River Steel Chief Executive Officer David Stickler said in a statement.

Big River is the only environmentally friendly, LEED-certified steel production facility in the world. A Leadership in Energy and Environmental Design designation is given to facilities across all industries that are committed to sustainability efforts and energy efficiency.

State support was critical in the development of the Mississippi County mill. Arkansas granted multimillion dollar incentives to build the facility, including supporting a $125 million bond issue. The Arkansas Teachers Retirement System contributed about $150 million to the project -- an investment that will have a generous payout.

Retirement system Executive Director Clint Rhoden said Tuesday that the fund should receive about $280 million when the transaction closes.

Big River's scrap metal recycling and flat-rolled steel production began in 2017 and today serves more than 225 customers in the automotive, energy, construction and agricultural industries.

In November, the Arkansas steel facility completed a $716 million expansion ahead of schedule and under budget, announcing that the addition would double production capacity. The company employs 650 workers in Arkansas and can produce 3.3 million tons of steel annually.

The mill, on its website, boasts: "At our core we're a technology company. We just happen to make steel." The mill is recognized across the industry for its innovative approach to steelmaking, including the use of artificial intelligence in its production practices to manufacture "quality steel products in smarter, faster and more precise ways," the website says.

The $1.3 billion Big River facility is the largest industrial project in Arkansas history. It was the world's first flex mill, meaning it has the agility to produce a wide spectrum of products and can adjust operations quickly and efficiently to meet customer needs.

Combining the two companies "means U.S. Steel is uniquely positioned to create steel solutions for our customers that is unmatched in the industry," Burritt said on the call with analysts.

"We know the high importance of integration, and we are keenly focused on how we will bring Big River into the U.S. Steel family," Burritt added, noting his company will have a "high priority on preserving Big River's unique, entrepreneurial culture to ensure they continue to do what they best -- operate the country's leading mini mill to its fullest potential."

U.S. Steel said it was able to act quickly to complete the acquisition because of its "strong liquidity" attributed to improved pricing for steel products and customer demand. Burritt predicted the trend will continue. The coronavirus pandemic, he said, is not disrupting production or reducing the needs of customers.

The addition of the Big River Steel mill makes the company "more resilient in any market environment," Burritt said. "We see steel demand continuing to strengthen, both domestically and in Europe, particularly in key customer-driven end markets such as automotive, appliances and packaging."

The Big River Steel expansion that was completed last month will be important to growth opportunities, Burritt told analysts. "The Big River team is quickly ramping the new capacity, and we look forward to the value the phase two expansion will bring to the business," he said.

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