Steel Mills
U.S. Steel To Sell Transtar Railroads for $640 Million
Written by Michael Cowden
June 8, 2021
U.S. Steel has agreed to sell its Transtar LLC railroad subsidiary to an affiliate of Fortress Transportation and Infrastructure Investors LLC (FTAI) for $640 million.
The Pittsburgh-based steelmaker said it expects the deal to close in the third quarter of this year pending customary closing conditions and certain regulatory approvals.
Money from the sale will be used to pay down debt and strengthen U.S. Steel’s balance sheet. The transaction will also allow the company to focus more on its “core” mining and steelmaking business.
“By monetizing our railroad assets at an implied multiple well above our existing valuation, we create immediate value for our stockholders,” U.S. Steel President and Chief Executive Officer David B. Burritt said in a statement.
“In addition, the strong partnership we have created with FTAI will ensure continued support of our steelmaking facilities with predictable and cost-effective railroad operations,” he added.
U.S. Steel said it had signed an initial 15-year contract with FTAI – which it described as an experienced railroad operator – to maintain existing operations at the six railroads that comprise Transtar®: the Gary Railway Company in Indiana; the Lake Terminal Railroad Company in Ohio; Union Railroad Company LLC in Pennsylvania; Fairfield Southern Company Inc. in Alabama; Delray Connecting Railroad Company in Michigan; and the Texas & Northern Railroad Company in Texas.
Citi acted as U.S. Steel’s financial advisor in the transaction. Jones Day and Baker & Miller PLLC was the steelmaker’s legal advisor.
U.S. Steel’s last big transaction was in January, when it purchased its remaining stake in Osceola, Ark., electric-arc furnace steelmaker Big River Steel for $774 million. The company also in a surprise move cancelled a $1.3-billion modernization project at its Mon Valley Works in western Pennsylvania.
Burritt said during an earnings conference call in late January that U.S. Steel was working on “reducing capital intensity.”
By Michael Cowden, Michael@SteelMarketUpdate.com
Michael Cowden
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