Texas Steelmaker Acquires Gerdau's US Steel Mill and Fabrication Assets

SEATTLE (Scrap Monster): The Irving, Texas-based Commercial Metals Company has entered into a definitive agreement in connection with acquisition of certain rebar steel mill and fabrication assets from Gerdau S.A.

The all-cash deal is worth $600 million, subject to customary conditions. The deal is subject to regulatory approval. The deal has already received nod from the boards of directors of both Commercial Metals Company and Gerdau S.A. The transaction is expected to close before the end of 2018. Further to this, Gerdau’s steelmaking capacity in North America will be trimmed by about 23%.

As part of the deal, 33 of the US rebar fabrication facilities of Brazilian Gerdau will get added to Commercial Metals’ fold. In addition, the deal also covers steel mills located in Knoxville, Tenn.; Jacksonville, Fla., Sayreville, N.J, and Rancho Cucamonga, Calif. The acquisition is expected to double the company’s rebar fabrication capacity and help the company to serve more regions of the country in more effective manner. Commercial Metals Company will absorb all the 2,700 employees currently employed at the Gerdau facilities.

Barbara Smith, president and CEO of Commercial Metals noted that the company is already running at capacity, thus making it unable for them to provide any further product. However, the addition of additional capacities will aid the company to diversify its product portfolio and expand its geographic footprint in states such as Texas, California, New York and Florida, which are expected to witness encoraging steel market conditions in 2018.

The acquisition is expected to result in significant optimization of steel mill and fabrication facilities across geographies, thereby leading to cost savings of around $40 million per year. It will add 2.7 million tons of additional melt capacity, thus elevating its global melt capacity to approximately 7.2 million tons. The company also plans to invest up to $250 million over the next five-year period in the newly acquired facilities towards making them more efficient.

Upon completion of the deal, Commercial Metals Company will have second largest rebar fabrication capacity in the US, after Nucor Corp. Of late, Nucor too has been making significant investment is steelmaking capacities.

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Following the news of acquisition, the shares of Commercial Metals Company surged by nearly 7% on Tuesday to close at $22.77.