Monday 3rd December 2018
Adding KCI’s 1.1mt electric arc furnace in Illinois & market leading downstream operations, the deal positions Liberty as one of the foremost producers of wire rod in the US
Deal combines existing Liberty Steel Georgetown steel plant and is financed via equity, a Revolving Credit Facility from two major North American Banks and a Term Loan from funds managed by BlackRock Financial Management Inc.
New York, NY—Dec 3, 2018— British Industrialist Sanjeev Gupta’s GFG Alliance (GFG), a global industrial leader with a presence in 30 countries around the world, announced today that it signed a binding agreement to purchase all of the outstanding stock in Keystone Consolidated Industries, Inc. (KCI) from Contran Corporation (Contran). Under terms of the deal GFG Alliance company Liberty Steel USA will acquire KCI, including all its subsidiaries, for $320 million in cash less certain assumed liabilities. Subject only to regulatory review, the purchase is expected to close on or before December 31, 2018.
Keystone Steel and Wire, a division of KCI, has a 100+ year history in the steel and steel products business and a strong reputation for quality and performance. KCI has recently posted its strongest results in its long history and adds a top-producing wire rod facility with a 1.1mt capacity electric arc furnace (EAF), the market leading agricultural fence products of RedBrand®, industrial wire, an MBQ/SBQ bar mill, three welded wire reinforcement mesh facilities and a PC strand facility to the Liberty Steel USA family. KCI has been consistently profitable and has substantially improved its profitability over the last 5 years as it expanded significantly into value added products to augment its original position as a preeminent supplier of low carbon wire rod. The acquisition will vault Liberty into position as one of the leading producers of wire rod in the United States.
Proforma for the transaction Liberty Steel USA will have up to 1.8mtpa of EAF melting capacity, 2mtpa of wire rod rolling capacity, significant value-added downstream businesses and over 1,300 employees. The combined company will have operations in Illinois, Ohio, South Carolina, New Mexico, Texas and Georgia.
The deal is financed by two large North American banks who will be providing an asset backed loan facility and funds managed by BlackRock Financial Management Inc. who will be providing a term loan. GFG will contribute equity and its unencumbered Liberty Steel Georgetown plant to the transaction.
“The Keystone acquisition is a core part of GFG’s GREENSTEEL vision to become a leading U.S. producer of high quality, cleanly produced steel,” said Sanjeev Gupta, executive chairman of Liberty and the GFG Alliance. “As we look ahead to the future, GFG will benefit from Keystone’s century-long history, its robust operations, and its reputation for producing top quality steel.”
“KCI and its businesses offer Liberty the chance to merge our existing U.S. steel business with one of the country’s most productive wire rod operations,” said GFG North American CIO Grant Quasha. “Combined with Liberty Steel Georgetown, KCI will increase our downstream capabilities, create critical synergies, add strong management and provide better value and products for customers as we advance our U.S. steel business to our 5mt pa goal.”
GFG acquired Liberty Steel Georgetown, its Georgetown, South Carolina steel plant, at the end of 2017 from Arcelor Mittal who had mothballed the plant. The Company restarted the plant in June of 2018 and has been steadily ramping production to an estimated 400kt run rate by the first quarter of 2019, with further expansion to follow. GFG has rehired over 100 employees at the site, recruited over 50 new employees, has revitalized the facility and has re-established its reputation to be the premier producer of high carbon wire rod in the US.
Together, KCI and Liberty Steel Georgetown will form the core of GFG’s North American business which the company is looking to grow further with additional acquisitions in the coming months. GFG plans a diverse mix of assets for the U.S. business, ranging from the revitalization of steel plants that had previously been taken offline, such as Georgetown, to those which are operating and performing very well like KCI. While the current portfolio is focused on value added long steel products, the company is actively pursuing additional acquisitions in flat products and further downstream capabilities to drive towards 5mt pa of capacity by 2020.
GFG was advised by Deutsche Bank Securities Inc., Wyelands Capital Ltd. and Norton Rose Fulbright on the transaction. Contran was advised by Stephens Inc. and Gibson, Dunn & Crutcher.
Ed James, High 10