No.2 Russian steelmaker NLMK buys US steel producer Beta for $400 million in cash

06 September 2008

In another example of the growing international influence of the new breed of Russian billionaires, Vladimir Lisin's Novolipetsk Steel, or NLMK, the second-largest steelmaker by market value and the fourth-largest by volume in Russia, said Thursday that it had agreed to pay $400 million in cash for US hot-rolled steel producer Beta Steel to expand its market in the region.

Beta, based in Portage, Indiana, will provide unprocessed steel for NLMK's most recent American acquisition, John Maneely Co., a steel pipe manufacturer, which it agreed to buy last month for $3.53 billion. (See: Novolipetsk Steel to acquire John Maneely Company from The Carlyle Group for $3.53 billion)

"This acquisition is fully in line with our commitment to develop a strong footprint in the US high value-added finished steel market," Novolipetsk Steel's president and chief executive, Alexei Lapshin, said. The deal, which Novolipetsk will finance from existing funds and available credit lines, is expected to close in the fourth quarter of 2008.

Steel makers in Russia, the world's fourth-largest producer, have acquired around 10 per cent of US steel-making capacity in the last few years as they spend billions of dollars from record profits betting on steel demand in North America. Russia's biggest steelmaker, Severstal, in the last year has spent more than $1.7 billion on US steel mills, and recently agreed to buy miner PBS Coals for a further $1.3 billion. (See: Russian steelmaker Severstal buys American coal miner for $1.3 billion)

Evraz Group and TMK, the country's biggest steel pipe manufacturer, have also made such acquisitions in the last year.

"NLMK's strategy is aimed at portfolio diversification and downstream integration in the core markets of the company, including the European Union and the United States, because it strengthens NLMK's position and provides an entry point into an important and high-margin end market," a Novolipetsk spokesman said on Thursday.

The Beta acquisition "completes the creation of a large, vertically integrated pipe and tube producer in North America comprising the assets of John Maneely Co., Beta Steel and Duferco Farrell," NLMK said in its statement.

In addition to providing hot-rolled steel for John Maneely, Beta - located in the heart of the so-called Rust Belt in the US Midwest - will add to the vertically integrated stature of the company by being located near significant suppliers of scrap metal. The Midwest accounts for 60 per cent of the country's hot-rolled coil consumption and 40 per cent of scrap generation, NLMK said in its statement.