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U.S. Steel (X) to Purchase Remaining Stake in Big River Steel

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Zacks Equity Research
·3 min read
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United States Steel Corporation X stated that it has exercised its call option to acquire the remaining equity of Big River Steel for around $774 million. The deal is financed from its cash in hand. Notably, the company had nearly $2.9 billion of liquidity, including more than $1.7 billion of cash, as of Nov 30, 2020. U.S. Steel expects the deal to close in first-quarter 2021, which is subject to satisfaction of customary closing conditions.

Per U.S. Steel, the transaction is expected to be immediately accretive to its earnings. Further, the deal has potential for significant synergies that will boost long-term value.

Big River Steel operates a LEED-certified Flex Mill in northeast Arkansas. The facility is believed to be the latest and most advanced flat-rolled mill in North America. It offers high-quality products and services to customers in energy, automotive, construction and agricultural industries. Big River Steel has doubled the mill’s hot-rolled steel production capacity to 3.3 million tons per annum, courtesy of its Phase II-A expansion that was completed last month. It has established itself as one of the largest electric arc furnace-oriented flat-rolled mills in North America.

Since acquiring 49.9% ownership stake in Big River Steel in October 2019, U.S. Steel has been creating strategic benefits, validating strong strategic rationale that is expected to be realized upon achieving full ownership.

U.S. Steel’s shares have gained 40.2% in the past year compared with the industry’s 17.1% rise.

Zacks Rank & Key Picks

U.S. Steel currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Impala Platinum Holdings Ltd. IMPUY, BHP Group BHP and Silvercorp Metals Inc. SVM. While Impala Platinum sports a Zacks Rank #1 (Strong Buy), BHP Group and Silvercorp Metals carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of 131.7% for fiscal 2021. Its shares have returned 43.5% in the past year.

BHP Group has an expected earnings growth rate of 32.4% for fiscal 2021. The company’s shares have gained 19.5% in the past year.

Silvercorp Metals has an expected earnings growth rate of 40% for fiscal 2021. The company’s shares have increased 16.2% in the past year.

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United States Steel Corporation (X) : Free Stock Analysis Report
 
BHP Group Limited (BHP) : Free Stock Analysis Report
 
Impala Platinum Holdings Ltd. (IMPUY) : Free Stock Analysis Report
 
Silvercorp Metals Inc. (SVM) : Free Stock Analysis Report
 
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