For its investment, Gerdau will get title to Sheffield Steel's local melt shop and rolling mill, a smaller rolling mill in Joliet, IL and three downstream steel-fabricating facilities in Kansas City, MO and Sand Springs. Gerdau also is getting Sheffield Steel's reinforcing bar, or rebar, and merchant bar manufacturing capabilities, products with a wide variety of applications from reinforcing highway concrete to furniture.
Gerdau CEO and chairman Mario Longhi pointed out that, with Gerdau attempting to meet growing worldwide demand for rebar and merchant bar products, the proposed acquisition comes at a good time. "Rebar and merchant bar demands remain strong and we're working to meet that demand through continued consolidations," Longhi said during yesterday's first-quarter earnings call.
The addition of Sheffield Steel's fabricating facilities to Gerdau's capacity will significantly boost its overall manufacturing abilities, according to Longhi. "We're excited about the prospects of this merger and hope to close in the June quarter," he said. Gerdau boosted its April offer to seal the exchange. It originally planned to spend $76 million in cash and assume $94 million in debt.
Founded in 1929 as Tulsa Rolling Mills, Sheffield Steel fell on hard times during the 1990s. It filed Chapter 11 in 2001, citing economic slowdowns, high energy costs and steel dumping from foreign competition. A reorganized Sheffield emerged from bankruptcy in March 2005, working to build capacity and its balance sheet to attract Gerdau as a strong suitor.
"This transaction is a positive outcome for Sheffield Steel, our employees and the communities we operate in because of the excellent reputation and financial strength of Gerdau Ameristeel," James Nolan, Sheffield Steel's chairman and CEO, said in a prepared statement. "Under the leadership of Gerdau Ameristeel, the combined organization will have additional resources and capabilities with which to service our existing customers as well as the expanding southwestern markets."
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