Renco To Buy Severstal Steel Plants(2)
MORGANTOWN, W.Va. (AP) -- Severstal North America said Wednesday the private equity firm Renco Group Inc. is buying steel operations in four states in a $1.2 billion deal that includes the repayment of $317 million in debt.
Russian-owned Severstal will sell the former Wheeling-Pittsburgh Steel facilities in the Ohio Valley, including Wheeling Corrugating in Wheeling, W.Va., and the Allenport facility in Allenport, Pa.; the former WCI Steel facility in Warren, Ohio; and the former Bethlehem Steel facility in Sparrows Point, Md.
The deal also includes 50 percent ownership of Mountain State Carbon, a coke plant in Follansbee, W.Va., and Ohio Coatings in Ohio.
Severstal will get $125 million in cash and a $100 million secured note, as well as the repayment of debt. New York-based Renco also assumes labor and environmental liabilities totaling $650 million.
Renco says the deal will make its newly formed subsidiary, RG Steel, the fourth largest flat-rolled steel producer in the U.S. Flat-rolled steel is used in vehicle bodies.
Sergei Kuznetsov, chief executive of Severstal International, said the deal will help Severstal North America "evolve into a stronger and more focused organization."
The United Steelworkers said it welcomes the deal and has reached tentative agreement on a contract covering all hourly production and maintenance workers. A global economic crisis that led to a dramatic drop in steel demand has led to long-term shutdowns and layoffs at the various Severstal facilities.
"Our members have withstood two years of uncertainty brought about by circumstances beyond their control," said union President Leo Gerard. "Finally, their patience and solidarity have been rewarded, and the ownership issues have finally been resolved."
District 1 Director David McCall, who chairs the negotiating committee, said the union "must now do everything we can to ensure the profitability of these plants."
Maryland Gov. Martin O'Malley also welcomed RG Steel headquarters to the state. He said in a statement that the deal promises continued employment and retraining for the nearly 2,000 workers at Sparrows Point near Baltimore.
Severstal suspended steel production there in July and laid off about 1,200 hourly employees, according to the United Steelworkers.
"For generations, Sparrows Point has been a major employer and a significant economic asset for the state," the Democratic governor said.
Democratic U.S. Sen. Jay Rockefeller, who chaired a Commerce Committee hearing on the future of manufacturing Wednesday in Washington, D.C., said he was "cautiously optimistic" about the future of the plants in West Virginia.
"But we are still at the mercy of an unstable market and must continue to be patient," he said, adding that he would urge Renco to keep the current employees and pledging to do what he can to boost the manufacturing sector.
The transaction is expected to close this month.
Renco, an investment holding company based in New York, has business interests in mining, defense equipment, fabrication of metal products and automotive supplies.
David Dishneau contributed to this report from Hagerstown, Md.