Fortress Transportation and Infrastructure Investors LLC (FTAI) has reported it will purchase United States Steel Corporation’s rail operating subsidiary, Transtar, LLC.
The $640 million deal is expected to close in third-quarter 2021.
Transtar comprises six short lines connected with U.S. Steel’s largest production facilities, including Gary Works and Mon Valley Works:
• Delray Connecting Railroad Company (Michigan)
• Fairfield Southern Company, Inc. (Alabama)
• Gary Railway Company (Indiana)
• Lake Terminal Railroad Company (Ohio)
• Texas & Northern Railroad Company (Texas)
• Union Railroad Company, LLC (Pennsylvania)
FTAI has agreed to provide rail service to U.S. Steel for “an initial term of 15 years with minimum volume commitments for the first five years,” it said.
FTAI owns transportation infrastructure in the rail and energy markets, including a multi-modal crude oil and refined products terminal in Beaumont, Tex., and railcar cleaning assets in Maine. It also owns the Repauno Port and Rail Terminal (New Jersey) and the Long Ridge Energy Terminal (Ohio and West Virginia).
“FTAI is extremely excited to enter into this strategic rail partnership with USS as it allows us to significantly increase our rail business by providing essential rail services to one of the preeminent integrated steel producers in North America under a long-term contractual arrangement,” FTAI Chairman and CEO Adams said. “In addition, we believe we can grow the profits of the business through optimization of operations; addition of third-party revenues from ancillary storage, switching and repair services; and new developments at four other rail properties included in the transaction.”
“By selling Transtar to an experienced railroad operator, U.S. Steel can better focus on our broader ‘Best for All’ strategy,” U.S. Steel President and CEO David B. Burritt said. “By monetizing our railroad assets at an implied multiple well above our existing valuation, we create immediate value for our stockholders. In addition, the strong partnership we have created with FTAI will ensure continued support of our steelmaking facilities with predictable and cost-effective railroad operations.”
The sale, FTAI noted, is “subject to customary closing conditions including receipt of certain regulatory approvals.”
For FTAI, Morgan Stanley and Barclays acted as financial advisors, and Sidley Austin LLP acted as legal advisors. For U.S. Steel, Citi acted as financial advisor, and Jones Day and Baker & Miller PLLC acted as legal advisors.