Oct. 19, 2006 — Gerdau Ameristeel Corp. has formally agreed to enter into a joint venture with Pacific Coast Steel, Inc. (PCS) and Bay Area Reinforcing (BAR).
Gerdau Ameristeel will acquire a controlling interest in the new joint venture, Pacific Coast Steel, for an expected purchase price of approximately $104 million in cash, less the assumption of certain long-term liabilities. Gerdau Ameristeel has sufficient cash available to fund the transaction.
PCS and BAR, which are commonly owned, comprise one of the country's largest reinforcing steel contractors, specializing in the fabrication and installation of reinforcing steel products across a variety of construction projects throughout California and Nevada. PCS was recently listed by the Engineering News Record, a leading national publication on engineering and construction, as one of the top 50 Specialty Contractors in the United States.
“Strategically growing our downstream operations is integral to the overall success of Gerdau Ameristeel,” commented Mario Longhi, President and CEO of Gerdau Ameristeel. “PCS is currently a customer of our newly acquired Sand Springs, Okla., mill, as well as our mill in Beaumont, Texas. The partnership should be immediately accretive to our earnings."
PCS and BAR have more than of 1000 employees, including over 800 field ironworkers. They also operate four rebar fabrication facilities in San Diego, San Bernardino, Fairfield, and Napa, Calif., with a combined capacity in excess of 200,000 tons per year.
“We are extremely excited about the opportunities this transaction brings,” remarked J. Neal McCullohs, Vice President of Commercial and Downstream Operations for Gerdau Ameristeel. “It supports our approach of strategically growing our core downstream business, rebar fabrication, and provides the knowledge base of in-field placing. The management team of PCS is well respected in the industry and second to none on the west coast.”
The transaction, which is subject to satisfactory completion of anti-trust and applicable regulatory reviews and other customary closing conditions, will include certain put and call rights beginning on the fifth anniversary of the transaction. The transaction is expected to close in the fourth quarter of 2006.
Gerdau Ameristeel is the second-largest minimill steel producer in North America with annual manufacturing capacity of over 9.0 million tons of mill finished steel products. Through its vertically integrated network of 17 mini-mills (including one 50% owned minimill), 17 scrap recycling facilities and 46 downstream operations, Gerdau Ameristeel primarily serves customers in the eastern two thirds of North America. The company's products are generally sold to steel service centers, steel fabricators, or directly to original equipment manufactures for use in a variety of industries, including construction, cellular and electrical transmission, automotive, mining and equipment manufacturing.