Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Evraz to Pay $565M For Claymont Steel

Steelmaker Evraz Group on Monday announced its second U.S. acquisition this year by agreeing to pay $564.8 million for Delaware-based steel plate producer Claymont Steel Holdings.

Evraz, Russia's largest steelmaker by domestic volume, said it would pay $23.50 per share for Claymont, valuing the U.S. firm at a 6.8 percent premium to its Friday close of $22.00 and 19.1 percent more than its three-month weighted average.

Analysts said the purchase price was favorable given that Evraz would increase its share of the lucrative U.S. steel-plate market and a forecast increase in earnings at Claymont.

"Considering the increasing difficulty of making cheap and value-accretive acquisitions, we believe the price is a good one," Dmitry Kolomytsyn, analyst at brokerage Aton, wrote in a note.

Steelmakers in Russia, the world's fourth-largest producer, are keen to acquire steel-rolling assets in North America to get access to the large U.S. and Canadian markets.

"It will expand our presence in North America, one of the most important steel markets globally," Evraz chairman and chief executive Alexander Frolov said.

Evraz created the world's largest rail producer this year through its $2.3 billion acquisition of Oregon Steel Mills, which also produces plate. Russian rival Severstal already owned the former Rouge Steel plant in Michigan.

Claymont Steel has capacity to produce over 500,000 tons per year of carbon steel plate at its plant in Claymont, Delaware. The mill makes plate of nonstandard dimensions for specialist customers including bridge, rail car and machinery producers.

"There are not too many plate producers. Evraz is trying to build up its market share in this segment," Troika Dialog metals analyst Sergei Donskoi said.

Evraz said Claymont's board of directors had unanimously recommended that shareholders accept the offer. The bid, which is expected to commence next week, has been also supported by HIG Capital, owner of 42.6 percent of Claymont's stock.

Evraz said its offer was made in cash.

Kolomytsyn said the offer could be financed by part of a $3.2 billion syndicated loan secured by Evraz last month. Part of this credit will go toward repayment of a $1.8 billion bridge loan raised to finance the Oregon Steel acquisition.

Evraz, in which Roman Abramovich owns a 41 percent interest, owns three steel mills and several coal and iron ore mines in Russia as well as assets in Italy and the Czech Republic.

Its London-listed stock rose 7.5 percent to $86, close to an all-time high struck in late October and three times what it was worth at the start of this year.

ABN Amro is acting as exclusive financial adviser to Evraz and dealer-manager for the tender offer.