BlueScope Steel to buy rest of US venture with Cargill for $720 mn

BlueScope Steel Ltd, Australia's largest steelmaker, today struck a deal to buy the remaining 50 per cent of its US joint venture - North Star BlueScope Steel LLC - with Cargill Inc for $720 million.

The acquisition price of $720 million with $40 million net debt to be assumed by BlueScope implies a multiple of 7.1 times FY2015 EBITDA and pro-forma FY2015 cash flow per share accretion of 26 per cent, BlueScope said in a statement.

Since FY2005, the company's 50-per cent stake in North Star has generated over A$1.1 billion in cash dividends.

BlueScope added that it exercised its right of last refusal under the North Star shareholders' agreement, matching an offer received by Cargill from an unnamed third party.

BlueScope expects to fund the deal through long-term bank debt and issuance in the US capital markets.

Commenting on the transaction, BlueScope's managing director and CEO, Paul O'Malley, said, ''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.''

''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 US capital markets issuance and longer term bank debt,'' he added.

With 380 employees, North Star produces 2 million tonnes per annum (mtpa) of hot rolled coil at its mini-mill located in Delta, Ohio.

The business is recognised by customers in the independent Jacobson survey as the leading mini-mill in the US based on quality, service and on-time delivery, and it has consistently operated at full capacity.

In India BlueScope has an equal joint venture with Tata Steel to manufacture and supply flat steel products, coated steels and also a range of metal building solutions.

Tata BlueScope Steel has three manufacturing facilities operational at Pune, Bhiwadi in Rajastan  and Sriperumbudur  in Tamil Nadu as well as a new Coated Steel manufacturing facility coming up at Jamshedpur.