Nucor To Acquire Gallatin Steel For A Cash Purchase Price Of $770 Mln

(RTTNews) - Steel products maker Nucor Corp. (NUE) Monday said it has entered into an agreement to purchase all the equity of Gallatin Steel Co. for a cash purchase price of about $770 million. Adjusting for the net present value of the anticipated tax benefits, the realized effective purchase price for Nucor is around $630 million.

Gallatin is a flat rolled mini-mill located in Gallatin County, Kentucky, that melts scrap, pig iron and hot briquetted iron from various sources, and processes the material to produce flat rolled steel. Gallatin's assets produce a wide range of steels from low to high carbon grades with an annual capacity of around 1.8 million tons.

Gallatin will enhance Nucor's current position serving flat-rolled customers in the growing pipe and tube segment. Nucor expects this transaction to be immediately accretive to cash flow and accretive to earnings after working through purchase accounting-valued finished goods inventories.

The purchase price represents a multiple of 6.4 times estimated 2015 EBITDA before synergies and approximately 5.3 times estimated 2015 Earnings Before Interest, Tax, Depreciation and Amortization or EBITDA before synergies net of anticipated tax benefits.

Located on the Ohio River in Ghent, Kentucky, the flat-rolled products mill has an annual capacity of approximately 1,800,000 tons and broadens Nucor's footprint in the important Midwest region.

Adding Gallatin to Nucor's four existing flat-rolled mills will increase the firm's total flat-rolled product annual capacity by 16 percent to approximately 13 million tons.

Ladd Hall, Executive Vice President of Flat-Rolled Products, said, "Gallatin is a great fit for Nucor and our sheet mill group. Our two companies have a strong cultural compatibility, particularly the importance and focus we each put on safety, quality and productivity. The acquisition will further strengthen our ability to meet the needs of all of our flat-rolled product customers."

The acquisition will be funded with available cash and commercial paper borrowings. Considering its strong balance sheet and healthy cash flow generation, Nucor does not expect to issue either long-term debt or equity as result of this purchase.

Meanwhile, ArcelorMittal and Gerdau jointly announced that they have entered into a definitive transaction agreement to sell their respective 50 percent interests in Gallatin to Nucor for a total cash consideration of $770m, subject to customary closing adjustments.

NUE closed down 0.4 percent on Friday at $54.96.