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AK Steel inks deal to buy plant

Dearborn facility costs $700 million

DEARBORN, Mich. — AK Steel has announced it reached an agreement to buy a Severstal steel plant in Dearborn for $700 million.

Severstal, a Russian steel company, used the plant to produce high-quality, flat-rolled steels primarily for the automotive, construction and appliance markets.

The deal also includes a coke making plant and interests in three joint ventures that process flat-rolled steel products.

AK Steel said it has no plans to stop operations at any of its current steelmaking or steel finishing plants, including Butler Works in Butler Township.

Based in West Chester, Ohio, AK Steel employs about 6,100 people in Pennsylvania, Ohio, Indiana and Kentucky.

Butler Works employes about 1,400.

It anticipates the deal with Severstal to close in the fourth quarter.

“This is a great thing for the company,” said Michael Wallner, a spokesman for AK Steel. “A strong company is good for all its plants.”

Wallner said the plant, which currently employs 1,400, will complement AK Steel's current carbon steel facilities.

The deal is not expected to have a major impact on Butler Works, as the two plants have separate purposes.

“They're completely different operations,” Wallner said.

While the Dearborn plant caters to automotive, construction and appliance companies, Butler Works primarily makes electrical steel used in power transformers.

Electrical steels produced at Butler Works include the only high-permeability electrical steel made in the United States, according to the company.

Wallner said the Dearborn facility produces steel through a basic oxygen furnace, which depends on raw materials like iron and coal.

Butler Works, on the other hand, typically melts scrap metal into steel through an electric arc furnace.

The company does not release information about how much steel each of its plants produces annually, but said the new plant is capable of producing 2.5 million tons of finished steel annually.

The company expects its annual shipments to exceed 7.5 million tons with the addition of the new plant and believes the deal will have immediate benefits once finalized.

“In addition to operational and productivity enhancements, the acquisition will create purchasing, transportation and overhead cost savings,” James Wainscott, the president of the company said in a news release.

He said he expected the transaction to immediately be beneficial to the company's earnings, and to create significant long-term value for AK Steel, its employees, customers and shareholders.

The company anticipates cost-based savings of about $50 million, with about $25 million realized in the first full year following the closing of the deal.

“That's significant,” Wallner said.

Wallner said Severstal spent $1.2 billion renovating the plant a few years ago.

In addition to its deal with AK Steel, Severstal also reached an agreement to sell a northeast Mississippi plant to Steel Dynamics for $1.63 billion.

Word of Severstal exiting the U.S. market began to circulate earlier this year as the West threatened sanctions against Russia for its activity in the Ukraine, but Severstal has not been among those companies targeted by those actions.

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