Severstal To Buy PBS Coals For $1.3B

Vancouver, British Columbia (AHN) - Russian steel giant OAO Severstal has agreed to buy American coal producer PBS Coals Corp. for $1.3 billion.

Servastal, Russia's largest steelmaker, is led by billionaire Alexei Mordashov, and has expressed interest in acquiring more coal assets in North America.

Severstal will buy a combination of shares from PBS and Penfold Capital Acquisition Corp. for $7.93 a share. Penfold Capital agreed to takeover PBS on June 17.

The acquisitions are similar with the strategies of Severstal rivals, ArcelorMittal and Posco, which have been shopping for coal mines as steel and coal prices reach record highs in the past year, according to Bloomberg.

Demand for raw materials has also increased with rising steel orders from China and India, the report added.

PBS produces over four million metric tons of coking coal annually. It also produces thermal coal in plants in Somerset County, Pennsylvania.

Coking-coal output, which was 1.5 million tons last year, is expected to double in the mid-term, reports said.

Severstal is expanding in the U.S., spending $950 million in buying an ArcelorMittal plant near Baltimore and WCI Steel Inc. in Ohio. It also bought steelmaker Esmark Inc. for $775 million.

The Russian steelmaker runs four steel mills in North America, which includes a plant in Dearborn, Michigan, and the SeverCorr plant in Columbus, Mississippi.

PBS is expected to supply 40 percent of the five million tons of coking coal the Russian company needs for its American mills.