UPDATE 1-Steel Dynamics unit to buy out Recycle South

NEW YORK, May 8 (Reuters) - Steel Dynamics Inc (STLD.O: Quote, Profile, Research, Stock Buzz), a U.S. steelmaker, said on Thursday its OmniSource Corp unit agreed to buy the outstanding shares in Recycle South, a regional scrap-metal recycling company, for about $500 million in cash and shares.

OmniSource owns 25 percent of Recycle South, a South Carolina company formed last August. Under the pact OmniSource will swap 3.94 million Steel Dynamic shares, currently worth about $138 million, plus $232 million in cash to buy the remaining 75 percent stake.

The aggregate deal value includes the assumption of certain liabilities, including net debt expected to total about $135 million. Steel Dynamics expects to complete the deal before the end of the second quarter. (Reporting by Joseph A. Giannone; Editing by Lincoln Feast)