Sparrows Point Steel Mill Sold To Renco Group
John Cirri, president of United Steelworkers Local 9477, said plans to restart “L” furnace and begin making steel at Sparrows Point have not materialized yet, but he’s hopeful.
The Renco Group, Inc. announced Wednesday morning that its newly formed subsidiary, RG Steel, LLC, has signed a stock purchase agreement to acquire the Sparrows Point steel mill and two other U.S. steel plants previously owned by Severstal North America.
The agreement calls for RG Steel to purchase all of the stock of Severstal Sparrows Point, LLC; Severstal Warren, LLC, of Ohio; Severstal Wheeling, Inc.; and Wheeling Corrugating Company of West Virginia, according to a press statement released by Renco this morning.
The transaction, estimated at $1.2 billion, will make RG Steel the fourth-largest flat rolled steel producer in the United States. The Renco Group also announced that RG Steel will be headquartered at Sparrows Point. Final completion of the sale is expected this month, pending regulatory approval.
“As far as we’re concerned, this is what we’ve been waiting for,” John Cirri, president of United Steelworkers Local 9477, told Patch.com this morning shortly after hearing the news in his office at Sparrows Point. “It may take a few weeks for business plans to begin to materialize and jobs to return to the plant, but we’re hopeful. We’re as happy as can be. Spirits are high.”
Additionally, RG Steel announced it will acquire a 50 percent ownership interest in Mountain State Carbon, LLC, a coke-making facility in Follansbee, WV, and Ohio Coatings Company, based in Yorkville, OH.
As part of the purchase, Renco also announced that RG Steel executed a new collective bargaining agreement with The United Steelworkers (USW), headquarted in Pittsburgh, subject to ratification by its members. Cirri said he expects to hear from the USW soon regarding the details of the agreement. He told Patch.com last week he believed all the union conditions had been met.
Severstal spent $2.2 billion to purchase the mills, buying Sparrows Point in March of 2008 for $810 million.
“The next step is to renew the labor agreement, bring the 'L' furnance back on line —returning people to work—rebuild the customer base and return to what we’re good at, which is making steel,” Cirri said. “I have one word and one word only for Severstal: Do svidaniya.”
Currently, about 820 steelworkers are on layoff from Sparrows Point. Severstal announced in July that it was idling the primary side, the hot mill, at Sparrows Point and later announced in November that it would remain idle at least through March.
The cold mill, coded products and tin mill have continued to run at Sparrows Point, but at reduced capacity.
"It's very exciting news for us, the guys down there, especially for the younger guys with houses who have been laid off" said Tom Szewczyk, 56, a former union representative who has worked in the tin mill for the past 10 years and faced on and off again layoffs in recent years. "It's like there's been a pall cast over that place for the last couple of years. It'll alleviate anxiety for a lot of people."
Cirri also said that he hopes the mill’s new owners, along with restarting the hot mill, will invest new capital into the steelmaking operations at Sparrows Point.
“What I hope to see is a revamping of our entire plant,” Cirri said. “I know our mill needs to be modernized. I’d like to see a plate mill built so we can start making all these wind mills that are going to be going up. A plate mill also has military applications.” Cirri added that steel manufactured from plate mill would also have large construction applications.
As transaction consideration, Severstal said in a press release that it 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.
RG Steel added in its statement that the company "will ensure 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 Renco Group, founded in 1975 by Ira L. Rennert, is a private, family-owned investment holding company with more than $5 billion in assets.
"The formation of RG Steel will create a dynamic, service-oriented company with strategically located facilities led by newly appointed president and chief executive officer John Goodwin, and a team of seasoned steel industry veterans,” said Ari Rennert, president of the Renco Group, Inc., in a statement accompanying Renco’s press release.
Goodwin joins RG Steel with 40 years of high-level steel industry leadership experience, including senior executive positions with U.S. Steel, National Steel, Beta Steel and Wheeling Pittsburgh Steel.
"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,” Goodwin said in a statement accompanying the press release.
Baltimore County Executive Kevin Kamenetz described the pending sale of the Sparrows Point plant as great news for Baltimore County.
“We are especially pleased that RG Steel has executed an agreement with The United Steelworkers and has chosen to locate its new corporate headquarters at Sparrows Point," said Kamenetz in a statement. "Most of all, we applaud the men and women who work at the steel mill, who through difficult times have kept the faith that a great steelmaking tradition will continue in Dundalk. We all look forward to the workers being called back soon and seeing the blast furnace up and running and producing steel for the global market."