Global steel giant ArcelorMittal has announced that it has entered into a 50/50 joint venture partnership with Japan-based Nippon Steel & Sumitomo Metal Corporation (NSSMC) to acquire the Alabama-based steel processing plant ThyssenKrupp Steel USA (TK Steel USA) from German steelmaker ThyssenKrupp for an agreed price of $1.55 billion.
The transaction which is expected to deliver $60 million of annual synergies will be financed through a combination of equity and debt at the joint venture level. The transaction includes a six-year agreement to purchase 2 million mt of slab annually from ThyssenKrupp's Brazil-based steel mill TK CSA, using a market-based price formula. TK CSA has an option to extend the agreement for an additional three years at more favorable terms to the JV, compared with the initial time period.
ArcelorMittal stated that the remaining slab balance for the Alabama steel mill will be sourced from ArcelorMittal plants in the US, Brazil and Mexico. ArcelorMittal will be responsible for marketing the product on behalf of the JV. The price ArcelorMittal will receive for its slabs will be determined by the volume, price and cost performance of the JV.
The Calvert facility will complement ArcelorMittal's existing auto business in the US. ArcelorMittal's current facilities for the auto segment in the US are at high levels of capacity utilization and the NAFTA automotive market is expected to show an increase in vehicle production of approximately 15 percent over the next decade.
This acquisition will also strengthen ArcelorMittal's position in supplying the NAFTA energy industry, which is expected to demonstrate growing demand for energy pipe and tube products due to increases in oil and natural gas exploration and production.