Russian steel company Evraz is to acquire IPSCO's Canadian plate and pipe business for a net cost of US$2.3bn as part of deal with parent company SSAB. The acquisition could see Evraz returning to the debt markets to raise the required financing.
IPSO Canada is a major North American producer of steel plate, as well as pipe for the oil and gas industry. Steel producer SSAB acquired IPSCO Tubulars as part of its acquisition of IPSCO in 2007.
The acquisition agreement specifically involves the sale of 12 tubular locations, including the Regina and Koppel steel mils in Canada, Regina coil processing facility and related scrap facilities. SSAB will retain the majority of the steel production capacity it acquired during its acquisition of IPSCO, including steel mills in Alabama and Iowa in the US.
The purchase forms part of Evraz's strategy to establish a platform in the North American downstream market for steel plate and tubular products.
"Following the successful acquisition of Oregon Steel Mills, this transaction will further enhance Evraz’s existing North American presence in high value-added steel segments,” comments Alexander Frolov, Evraz’s chairman and CEO.
“This deal will increase our exposure to the attractive energy and infrastructure sectors throughout the region. We expect substantial synergies from the combination of IPSCO Canada and Evraz’s existing North American operations,” he adds.
Under the terms of the agreement, Evraz will acquire IPSCO Tubulars business from SSAB for US$4.025bn. The Russian company has also signed back-to-back agreements with leading Russian tubular firm TMK and its affiliated companies to sell certain parts of the US business for a total US$1.2bn. The remaining segments of the acquired businesses will be sold to TMK for half a billion US dollars in 2009.
As a result of these transactions, the net cost of the original acquisition is will be roughly US$2.3bn.
The acquisition will be financed through a combination of a bridge loan, and a non-recourse term loan. Credit Suisse Securities (Europe) and Goldman Sachs International are acting as joint financial advisors to Evraz. Cleary Gottlieb Steen & Hamilton and Blak, Cassels & Graydon are legal counsel to Evraz.
Evraz is still in the market with its US$3.214bn structured multi-tranche credit facility raised to finance its acquisition of Oregon Steel Mills in the US. The deal has already signed, funded and fully underwritten by the mandated lead arrangers at the end of 2007, and is entering the final couple of weeks of general syndication. (Click here to read previous coverage, GTR eNews, February 21, 2007)
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