USA: Fortress Transportation & Infrastructure Investors has agreed to buy US Steel’s Transtar business, which operates six freight railways serving the steelmaker’s major production facilities.
These are the Gary Railway in Indiana, Lake Terminal Railroad in Ohio, Union Railroad in Pennsylvania, Fairfield Southern in Alabama, Delray Connecting Railroad in Michigan and Texas & Northern Railroad in Texas.
The $640m transaction is expected to be completed in Q3 2021, subject to customary closing conditions and regulatory approval.
The deal includes an exclusive rail partnership under which FTAI will provide rail services to US Steel for an initial term of 15 years, with minimum volume commitments for the first five years.
US Steel is disposing of Transtar as part of a strategy of focusing on its core mining and steelmaking activities. ‘By selling Transtar to an experienced railroad operator, US Steel can better focus on our broader Best for All strategy’, said US Steel President & CEO David B Burritt on June 8. ‘By monetising our railroad assets at an implied multiple well above our existing valuation, we create immediate value for our stockholders. 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.’
FTAI Chairman & CEO Joe Adams said the acquisition ‘allows us to significantly increase our rail business by providing essential rail services to one of the pre-eminent integrated steel producers in North America under a long-term contractual arrangement. In addition, we believe we can grow the profits of the business through optimisation of operations, addition of third-party revenues from ancillary storage, switching and repair services and new developments at four other rail properties included in the transaction.’
Citi acted as US Steel’s financial adviser, with Jones Day and Baker & Miller as legal advisers. Morgan Stanley and Barclays acted as financial advisers to FTAI and Sidley Austin acted as legal adviser.