Nucor buying Gallatin Steel for about $770M

Charlotte-based Nucor Corp., the largest U.S. steelmaker by sales, agreed to buy a Kentucky mill for about $770 million to boost its output of flat-rolled products.

The acquisition of Gallatin Steel Co. from ArcelorMittal and Gerdau SA will increase Nucor’s annual flat-rolled capacity by 16 percent to about 13 million tons, Nucor said Monday in a statement. The deal will add immediately to cash flow and will be funded with available cash and commercial paper debt, according to Nucor.

The deal, expected to close by the end of the year, is set to be Nucor’s biggest since before the financial crisis. Nucor Chairman and Chief Executive Officer John Ferriola said in July that the company, in considering potential acquisitions, is looking to expand its geographical reach, customer base and product portfolio.

“This acquisition appears to fit the bill,” Matt Murphy, an analyst at UBS AG in Toronto who has a buy recommendation on the stock, said Monday in a research note.

The acquisition “continues the trend of industry consolidation in the flat-rolled steel industry,” Anthony Rizzuto, an analyst at Cowen & Co. in New York, said in a note.

Gallatin, which began operations in 1995, is located on the banks of the Ohio River. The company manufactures more than 1.6 million tons of hot band coils a year, according to its website.

Nucor said it’s paying about 6.4 times Gallatin’s estimated 2015 earnings before interest, taxes, depreciation and amortization, before cost savings are taken into account.

Monday’s deal is Nucor’s biggest since it bought SHV North America Corp. for $1.44 billion in March 2008, according to data compiled by Bloomberg.

Nucor shares closed at $55.35, up less than 1 percent. The Associated Press contributed.