AK steel revealed its agreement to acquire Severstal, North America’s integrated steel making assets in Dearborn, Michigan today. The acquisition will be for $700 million in cash. It also includes a coke making facility and interests in three joint ventures that process flat rolled steel products. AK Steel should benefit immensely from this acquisition considering the upgraded steel making equipment and facilities. Also, the Dearborn plant produces flat rolled steels with high quality for the construction, appliance and automotive market. Plus, the Dearborn facility is located close to many of AK Steel’s customers so perhaps cost synergies are to be expected.
The acquisition will also ensure that employees at Dearborn and AK Steel are combined which will increase the overall strength of the company. The highly modernized equipment at Dearborn will aid AK Steel in securing much greater productivity, efficiency and operational flexibility. Dearborn’s blast furnace, rebuilt in 2007 is one of the best blast furnaces in the world for its size!
Plus the company anticipates cost synergies up to $50 million with around $25 million in the first year of the acquisition. Also, upon completion of the acquisition AK Steel’s annual shipments are expected to have a substantial increase; around 7.5 million tons. The company also advises readers to be wary, saying that such forward looking statements which include words like “estimates” and “expects” could be potentially misleading as the result could actually be significantly different from those currently expected by the management. However the acquisition turns out to be, from the face of it things look good for AK Steel.
