* Sells Severstal Columbus to Steel Dynamics
* AK Steel Corp is buying Severstal Dearborn
* Analysts anticipate dividends; deal to reduce debt
(Adds details on buyers, share movement)
By Silvia Antonioli and Maria Kiselyova
LONDON/MOSCOW, July 21 Russia's Severstal
said it would sell two U.S. steel plants for $2.3
billion, withdrawing from the U.S. market at a time of rising
tension between Russia and the West and turning its focus to its
Severstal will sell its Columbus unit in Mississippi and
Dearborn unit in Michigan to Steel Dynamics and AK
Steel Corp respectively, a sale that may allow the
Russian company pay an extra dividend and reduce debt.
Shares in Steel Dynamics, which outbid United States Steel
Corp for the plant with a $1.63 billion offer, rose 8
percent to a three-and-a-half year high.
AK Steel's stock initially rose 4 percent to a two-year
high, but later gave up all gains to trade down 4 percent,
suggesting investors were unhappy with the $700 million paid for
a plant that has weighed on Severstal's North American results.
Severstal, Russia's second-biggest steel producer, had said
in May that it was considering strategic options for these
plants, which produce steel products mainly for the autos
The sales comes as tensions between Russia and the West grow
over Moscow's involvement in the Ukraine crisis, which has
already resulted in a series of sanctions against Russian
companies and individuals and may lead to further sanctions.
Severstal, controlled by Russian billionaire Alexei
Mordashov, said politics did not influence its decision to sell
its U.S. businesses but some analysts think the situation may
have weighed on the final decision and the timing of the sale.
"The political sentiment could have pushed them to do it
because it is safer for them to stay away from the U.S. market,"
said a London-based analyst, who declined to be named due to the
sensitivity of the subject.
Severstal earlier divested plants in Maryland, Ohio and West
Virginia and said last week it would sell Pennsylvania-based
metallurgical coal producer PBS Coals to Canada's Corsa Coal
for an enterprise value of $140 million.
Severstal North America made up about 30 percent of the
TOWARD HIGHER MARGINS
The Russian steelmaker embarked on a series of international
acquisitions in the early 2000s, near the peak of the cycle for
steel and commodities. In the last couple of years, however, its
focus has switched from international growth to its
higher-margin domestic Russian steel market.
Large steelmakers, including ArcelorMittal, Tata
Steel and ThyssenKrupp, have been cutting production,
jobs and idling or selling plants in the last few years in
response to oversupply and weak steel prices ST-CRU-IDX.
"The Russian domestic business is more profitable than other
parts of the business and that's why other parts, such as the
U.S. branch, have lost some of their appeal," said Credit Suisse
analyst Semyon Mironov.
Some analysts, however, say selling assets in the United
States, a market that they see recovering in the next few years,
is a questionable strategy. Confidence in the sector, a major
industrial indicator, has improved slightly over the past few
months, even while overcapacity persists.
"The sale has been talked about for quite a while, but these
assets are in pretty good shape ... there was no rush for a
sale," said VTB Capital analyst Vadim Astapovich.
The Columbus factory, expected to boost Steel Dynamics'
production capacity by 40 percent, is a good buy, said analysts,
as it gives the company a stronger grip on the high-margin autos
and construction markets in southern United States and Mexico.
The Dearborn plant would expand AK Steel's exposure to the
autos market and help it cut costs, but analysts cautioned that
the plant has been a drag on Severstal's North American results.
DEBT CUT OR SPECIAL DIVIDEND
Although Severstal was already pretty financially solid,
having reduced its debt from a peak of $8.3 billion in 2008 to
$4.8 billion in 2013, according to Thomson Reuters data, the
cash it will obtain from the sale will allow it to reduce debt
further or to pay a special dividend.
"The deal could reduce Severstal's net debt to EBITDA to 1.3
times... However we do not rule out the company paying special
dividends, as deleveraging is not a pressing issue at this
point," VTB Capital said in a note.
The closing of the deal is not subject to any financing
conditions and is expected by the end of 2014, Severstal said.
Moscow-traded shares in Severstal rose 2 percent during
normal trading hours, outperforming a broader market index which
was down 1.34 percent.
(Additional reporting by Supriya Kurane, Sneha Banerjee and
Anannya Pramanick in Bangalore; Editing by Mark Potter, Jason
Neely and Savio D'Souza)