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Russian Steelmaker Severstal To Sell US Facilities

Published 07/21/2014, 10:28 AM
Updated 07/21/2014, 10:45 AM
Russian Steelmaker Severstal To Sell US Facilities

By Meagan Clark - Russian steelmaker Severstal (MCX:CHMF) has agreed to sell two U.S. steel facilities for $2.3 billion to U.S. rivals Steel Dynamics Inc (NASDAQ:STLD) and AK Steel (NYSE:AKS), the company announced Monday, exiting the U.S. market as tighter American sanctions against Russia create concerns about whether more Russian companies will lose access to loans and other financial tools in the West.

Severstal invested heavily in the locations in Mississippi and Michigan, which produce steel products mainly for the automotive sector, before the financial crisis and is now trying to cut costs. The company has been preparing to sell the facilities since late last year, it said. In the first quarter of this year, Severstal reported a $100 million loss on revenue of $3 billion.

“The sale of Columbus and Dearborn unlocks substantial value to Severstal’s shareholders,’’ Alexey Mordashov, Severstal’s chief executive, said in a statement.

Steel Dynamics said the $1.6 billion purchase of “one of the most modern mini-mills in North America,” in Columbus, Mississippi, will expand its operating base by 40 percent.

© Reuters. Rolled steel is seen after being treated on the pickle line at the Severstal steel mill in Dearborn, Michigan, in this June 21, 2012 file photo. Russia's Severstal said on July 21, 2014 it had agreed to sell its U.S. subsidiaries in a .3 billion deal that concludes the review of its North American operations and may allow the steelmaker to pay an extra dividend and reduce debt.

"We have been positioning our balance sheet and organizational structure for growth such as this," Mark Millett, CEO of Steel Dynamics, said in a statement.

AK Steel said the $700 million purchase of the Dearborn, Michigan, steel plant will add about one-third additional capacity to the company’s operations. 

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