Big River Steel closes deal with U.S. Steel, values Osceola mill at $2.3 billion

Privately held Big River Steel in Northeast Arkansas has closed on its deal announced last month to make United States Steel Corp. a minority stakeholder of the company’s scrap recycling and steel production facility in Mississippi County.

Under terms of the agreement, U.S. Steel will hold a 49.9% ownership interest in the world’s only LEED-certified steel production facility. U.S. Steel’s investment will join majority ownership positions now held by Big River Steel’s executive management team, the Arkansas Teachers Retirement System, and the preferred equity ownership position held by Koch-owned KM BRS LLC and TPG Furnace L.P., an affiliate of Goldman Sachs vehicle TPG Growth.

On Oct. 1, publicly traded U.S. Steel first announced it has taken a first step toward acquiring Big River Steel through the purchase of a 49.9% ownership stake for $700 million in cash, with a call option to acquire the remaining 50.1% over the next four years.

At the time, U. S. Steel said it had already committed financing to execute the transaction. The implied enterprise value of Big River Steel, including the expected completion of its Phase II-A expansion, which is fully-funded and already under construction, assumes a $2.325 billion enterprise value.

Big River Steel is installing equipment and technology at its Osceola mill that will double the company’s annual production capacity from 1.65 million tons to 3.3 million tons of flat-rolled steel. The expansion will facilitate Big River Steel’s ability to produce higher grades of electrical steel, demand for which is expected to increase with continued focus on energy efficiency and the increase in hybrid and electric vehicle sales.

The blockbuster deal comes nearly one year after Big River Steel fielded potential buyout offers and “strategic alternatives” as an ongoing concern, including setting up a virtual data room or scheduling site visits that allowed serious bidders to conduct due diligence on the finances and operations of the company’s sprawling 1,300-acre site in steel-rich Mississippi County.

At the time, key bidders that showed an interest in making potential offers for the company’s new Osceola mill were Charlotte, N.C.-based rival Nucor Corp. and Fort Wayne, Ind.-based Steel Dynamics Inc.

Big River Steel first broke aground on its $1.2 billion facility in September 2014. The company received $125 million in general obligation bonds under the state’s Amendment 82 provision that allows for so-called “super projects.”