Cargill Inc. said Thursday it has agreed to sell its North Star Steel unit, including its St. Paul steel mill that employs 430 workers, to Gerdau Ameristeel Corp. of Canada in a deal valued at approximately $266 million.
Included in the sale are large plants, called minimills in the steel industry, in St. Paul, Wilton, Iowa; Calvert City, Ky., and Beaumont, Texas; plus wire rod processing plants in Beaumont, Carrollton, Texas, and Memphis, Tenn.; and a grinding ball plant in Duluth.
A spokesman said that in addition to the 430 workers at the St. Paul plant, North Star employs 46 people at its Duluth plant. Companywide, North Star Steel employs 1,600.
"It's far too early to know what this may mean for employment," said Cargill spokesman David Feider. "This is new geography for them (Gerdau)."
Stephanie Shelton, spokeswoman for Gerdau, said existing North Star mills and employees should slide smoothly into the new company. "It is our intent to continue employment for everyone at the St. Paul mill," she said.
The sale of North Star's St. Paul plant comes on the heels of an announcement late last month that Rock-Tenn Co. will close its St. Paul folding carton plant at year's end, idling some 160 workers.
In a statement issued in Toronto, publicly traded Gerdau Ameristeel said it hoped to have the transaction clear regulatory review and be completed by the end of the year.
The sale of North Star isn't a surprise to Cargill watchers. The North American steel industry has been under stress for several years and is especially sensitive to economic conditions in the U.S. and Canada and to swings in currency valuations against other steel-trading countries.
The industry also faces stiff competition from imports, reducing investment interest in steel mills and processing plants. More recently, however, favorable pricing has revived the industry.
In August, Gerdau Ameristeel said its second quarter earnings jumped to $105.5 million, from a loss of $6.9 million in the same period of 2003, while sales grew to $733.8 million, from $440.8 million the year before.
Philip Casey, president and chief executive, said in announcing those quarterly results that globalization of the economy and consolidation in the industry were helping.
Minnetonka-based Cargill, with more than $60 billion in annual sales, has been repositioning itself as the world's largest processor of food and agricultural products. It earlier sold its minimill at Kingman, Ariz., to Nucor Corp., Gerdau's chief rival in the minimill steel industry.
The Thursday divestiture agreement doesn't include one remaining joint-venture steel mill Cargill owns. For now, at least, Cargill remains an equity holder in that separate company.
Minimills are smaller than the blast-furnace mills historically identified with Pittsburgh. These smaller mills use electric arc furnaces, often making steel products from recycled automobiles and other used steel products.
North Star's four mills produce about 2 million tons of wire rods, steel bars and similar products called long steel in the industry. In addition, the four specialty-products plants, like Duluth's, produce about 300,000 tons of products annually.
Nucor, based in Charlotte, N.C., is the largest U.S. steelmaker using recycled metal with $6.2 billion in sales in its most recent year. Gerdau Ameristeel has been busily acquiring U.S. and Canadian steel assets and is regarded a close second to Nucor.
If the deal is approved, the four North Star mills will join with Gerdau's 11 mills in Pennsylvania, Florida, Kentucky, North Carolina, Tennessee, Georgia, New Jersey and the firm's three Canadian mills in Ontario and Manitoba.
Gerdau Ameristeel was born in 2002 when Co-Steel Inc. of Canada merged with Gerdau SA, the diverse Brazilian marketer and processor of raw material products.
The Brazilian company remains the largest shareholder of the Canadian public company. But adding a little more confusion to the rapidly consolidating steel industry, Toronto-based Gerdau Ameristeel actually has executive offices in Tampa, Fla.
In Thursday's announcement, Gerdau's Casey called combining with North Star "a dynamic step in the continuing revitalization" of the industry.Pioneer Press/Lee Egerstrom
