Re-roller Marcegaglia Group has agreed to acquire most of the stainless-steel long products division of Finnish steelmaker Outokumpu, the two companies said in a statement July 13, in the Italian group’s first foray into producing crude steel.
The transaction will see Marcegaglia take over Outokumpu’s 450,000 mt/year electric arc furnace mill for specialty steels in Sheffield, UK, as well as a wire rod rolling plant and bar production facility at the same site. It will also take on a US bar production plant in Richburg, South Carolina, and wire rod hot rolling and drawn wire production assets in Fagersta, Sweden.
The Eur228 million ($228.48 million) deal does not include Outokumpu Long Products AB operations in Degerfors and Storfors, Sweden, which will continue operations under Outokumpu, which will evaluate their future, the Finnish group said.
The parties expect to complete the transaction by the end of this year, following clearance from competition authorities.
“Thanks to this important transformational investment, our group further strengthens its special steels business through two strategic lines,” Antonio and Emma Marcegaglia, respective president and vice president of Marcegaglia, said in the statement. “The first concerns stainless steel flat products, where a partial upstream integration of the value chain is achieved with a view to shortening and stabilizing supply chains; the second one, significantly expanding the production of long stainless-steel products and further enriching the range of products and types of steels. The operation is further aimed at consolidating our position in international markets by acquiring additional market share in both Europe and North America.”
For the first time in its history, Marcegaglia is investing in primary steel production while Outokumpu will now focus on its core business of flat stainless steel products.
“This divestment marks the accomplishment of the turnaround program for the long products business in the past two years…The sale is a natural step for Outokumpu in line with our strategy to focus on our core business, stainless steel flat products,” Heikki Malinen, President and CEO at Outokumpu, said.
Long products sales accounted for approximately 8% of Outokumpu’s Eur810 million of sales in 2021.
Investment bank Jefferies said it viewed the transaction as positive as it completes the exit of a non-core business at an attractive multiple (4.9 times 2021 adjusted EBITDA) considering the entire stainless complex over-earned in 2021.
Monthly alloy surcharges on nickel-bearing stainless steel products in Europe moved lower for the second successive month in July as nickel prices retreated from an unprecedented price spike in March. Outokumpu’s alloy surcharge for 304-grade cold drawn bars stood at Eur4,723/mt for July, down from Eur5,224/mt in June and from Eur5,485/mt in May
— Annalisa Villa