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3-2011 News
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Renco Acquires Three Mills from Severstal

The Renco Group Inc. has agreed to purchase Severstal North America’s operations at Warren, Ohio, Wheeling, W.Va., and Sparrows Point, Md. The $1.2 billion transaction, expected to close later this month, will likely add fuel to fears of overcapacity in the domestic steel market.

The Renco Group, a family-owned holding company with interests across a range of manufacturing industries, has formed RG Steel LLC to manage the new steel assets. With an estimated 7.5 million tons of steel capacity at the three locations, RG Steel will become the nation’s fourth-largest steel company.

Before the transaction, only one of the three newly acquired mills, the Warren operation, was producing material. Production has been halted at Sparrows Point since late 2010, while the Wheeling mill has been quiet for more than two years, not long after Severstal acquired the facility from Esmark in 2008. RG Steel offered no comment on when it would restart the idled production at the two mills.

Along with the mills, Renco will acquire Wheeling Corrugating Co., plus 50 percent ownership interests in Mountain State Carbon LLC, a cokemaking facility in Follansbee, W.Va., and Ohio Coatings Co., Yorkville, Ohio. RG Steel will receive one half of the coke output from Mountain State Carbon and will continue its longstanding relationship with Ohio Coatings. 

“The formation of RG Steel will create a dynamic, service-oriented company with strategically located facilities. We are looking forward to working with existing and future customers to establish the RG Steel brand as one synonymous with excellence in quality and service in the steel industry,” says Ari Rennert, president of The Renco Group.

RG Steel will be led by industry veteran John Goodwin, who will serve as president and CEO. Before accepting the new position, Goodwin worked for Wheeling-Pitt, U.S. Steel, National Steel and Beta Steel, among others.

Additionally, RG Steel has executed a new collective bargaining agreement with the United Steelworkers, subject to ratification by its members. RG Steel intends to provide a seamless transfer of ownership to avoid any potential impact to all key stakeholders including customers, suppliers and employees. All pending orders will be completed and fulfilled without any disruption or delay of service, as the USW is supportive of a smooth transition between the owners, the company claims.

The sales conclude a dramatic change for Severstal NA, a subsidiary of Russia’s OAO Severstal, which is left with two major North American production facilities, in Dearborn, Mich., and Columbus, Miss.

Severstal, which had been trying to divest the three domestic mills since last year, will receive $125 million in cash, a $100 million secured note and the repayment of $317 million of third-party debt at closing. Renco will also assume various Severstal financial liabilities including employee-related and environmental liabilities totaling $650 million.

“The sale of Warren, Wheeling, and Sparrows Point marks a strategic refocusing of our North American operations,” says Sergei Kuznetsov, CEO of Severstal International. “The sale of these assets will enable Severstal North America to evolve into a stronger and more focused organization that is better able to serve our North American customers.”

  
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