Australia’s largest steel manufacturer is on its way to become the sole owner of North Star BlueScope Steel (NSBS) after it has reached an agreement with Cargill to acquire the remaining 50% of the joint venture.
According to the ASX Announcement, the deal is worth $720 million and the acquisition will be funded through long-term bank debt and issuance in the US capital markets.
“This transaction will give us 100 per cent ownership of an asset that is highly regarded within the US steel sector; full ownership enhances BlueScope’s portfolio value and optionality and improves business flexibility. The North Star business delivers on our strategy of being cost competitive in steelmaking and is best in class,” said BlueScope’s Managing Director and Chief Executive Officer, Mr Paul O’Malley.
“Given North Star’s strong free cash flow generation and the current strength of BlueScope’s balance sheet, it is anticipated that the transaction will be funded through a combination of U.S. capital markets issuance and longer term bank debt. A fully funded interim facility is in place to support the acquisition. “
Established in 1996 in Delta, Ohio, North Star produces 2.0 million tonnes of hot rolled coil annually. The joint venture is Cargill’s lone remaining steel production investment.
“North Star is a high quality, structurally advantaged asset: it is centrally located within a large scrap pool, operates close to its core markets, has low conversion costs and benefits from a highly motivated and focused work force,” said Mr O’Malley.
“With assistance from a motivated workforce, North Star has increased output from a nameplate 1.5 mtpa in FY2001 to 2.0 mtpa in FY2015 with minimal capital investment. The team is working on further opportunities to boost output at low capital cost – targeting an increase in production capacity of 90,000 tonnes per annum over the next two years by increasing casting width and speed.”
Cargill is a global provider of food, agriculture, financial and industrial products and services.
“Cargill has been pleased with the performance of the NSBS team in Delta and the financial results of the joint venture. We have chosen to sell our interest in the joint venture to redeploy this capital elsewhere in Cargill’s portfolio and are confident in the team’s continued success under new ownership,” said Peter Hawthorne, Cargill vice president of Strategy and Business Development and chair of the joint venture’s board of directors.