Mergers and Acquisitions

U.S. Steel To Acquire 49.9 Percent Interest In Big River Steel

United States Steel Corporation announced October 1 a joint venture partnership agreement under which it has taken the first step towards acquiring Big River Steel through the purchase of a 49.9 percent ownership interest for approximately $700 million in cash.

The deal includes a call option to acquire the remaining 50.1 percent within the next four years. The implied enterprise value of Big River, including the expected completion of its Phase II-A expansion, which is fully funded and already under construction, is approximately $2.325 billion.

“U.S. Steel’s decision to partner with us through this investment in Big River is a decisive vote of confidence in our company, our vision and our people,” said Dave Stickler, CEO of Big River. “After just over two years of operations, we have built a unique platform that features the most advanced technology in our industry, and the very finest steel technicians in the business. We have always called ourselves a ‘technology company that just happens to make steel.’ In U.S. Steel, we have a likeminded technology-focused partner with an enduring tradition of excellence and a commitment to innovation. We are very excited about the possibility for what we can do together. As the newest steel production facility in North America, I could not be more proud to be partnering with a company started by Andrew Carnegie more than 118 years ago.”

Big River operates a LEED-certified, barge-served flex mill in northeast Arkansas that is the newest and most advanced flat-rolled mill in North America. Big River’s technological leadership allows it to produce a wide product spectrum, including advanced automotive steels and electrical steels, and provide high-quality products and services to customers in the automotive, energy, construction and agricultural industries.

Big River’s recently announced Phase II-A expansion is expected to double the mill’s hot-rolled steel production capacity to 3.3 million tons annually, establishing it as one of the largest EAF-based flat-rolled mills in North America.

“Our new partnership with Big River is designed to accelerate our strategy to offer our customers the ‘best of both’ by bringing together the capabilities of integrated and mini mill steel production,” said David B. Burritt, president and CEO of U.S. Steel.  “Big River operates the most advanced, state-of-the-art and sustainable mill in North America, and our investment would ultimately strengthen our competitive positioning in highly strategic steel-end markets, creating an unmatched value proposition for our stakeholders.”

U.S. Steel said the transaction provides numerous strategic and financial benefits, some of which will begin to be implemented immediately upon the closing of this transaction, while others would become fully realized upon full ownership of Big River. The move:

• strengthens U.S. Steel’s competitive positioning and establishes a product platform in strategic, high-margin end-markets, including energy, infrastructure and automotive;

• reshapes U.S. Steel’s footprint in the flat-rolled segment to create a more nimble, agile and customer-focused organization with new presence to serve growing U.S. and Mexico markets;

• complements U.S. Steel’s existing capabilities, as well as U.S. Steel’s previously announced strategic investments in advanced high-strength steel (AHSS) in Ohio, electrical steel line in Slovakia, electric arc furnace in Alabama, and endless casting and rolling technology in Pennsylvania;

• increases profitability, predictability and cash flow generation through the business cycle due to Big River’s low-cost position, highly variable cost structure and low sustaining capital expenditure requirements;

• positions U.S. Steel to achieve as much as $1 billion in capital and operational cash improvements by 2022 through activities such as rescoping asset revitalization investments, reducing fixed costs and enhancing its ability to pursue opportunities to extract incremental value from excess iron ore pellets; and

• enhances U.S. Steel’s talent through the addition of Big River’s experienced team with an entrepreneurial culture rooted in technology, and leverages over a century of making steel by U.S. Steel, including deep research and development resources and understanding of customers in key strategic markets that continue to grow profitably.

Dan Murray of KM BRS LLC (a subsidiary of Koch Minerals LLC), and current chairman of Big River, said, “We appreciate the opportunity to be a part of this exciting transaction that combines Big River’s state-of-the art, LEED-certified steel-making technology and U.S. Steel’s experience and demonstrated know-how.”  Upon the completion of the transaction, KM BRS, LLC and TPG Furnace L.P. (an affiliate of TPG Growth) would remain preferred equity holders of Big River.

Closing of the transaction is anticipated on October 31, subject to satisfaction of customary closing conditions.

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