Carlyle sells off steel group for $3.53bn

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The Carlyle Group agreed on Tuesday to sell John Maneely, a US manufacturer of steel pipes and tubes, to Russian steelmaker Novolipetsk Steel for $3.53bn, culminating a two-year turnround process.

Carlyle has voluntarily filed to have the deal reviewed by the Committee on Foreign Investment in the United States (Cfius), a panel that seeks to protect certain US national security interests from foreign investment.

The private equity firm and its advisers view John Maneely’s pipes and tubes – which are used in construction and as electrical conduits – largely as commodities, not as products that have national security, military or US government sensitivities, one person with knowledge of the deal said. The Cfius review could take one or two months.

Novolipetsk has been working to diversify its business by buying “downstream” assets that are closer to end users in its core steel markets. Ohio-based John Maneely produces more than 3m tonnes of steel pipe and tubes each year.

Novolipetsk already operates two manufacturing facilities in the US as part of a joint venture with steel production group Duferco. One of those facilities supplies John Maneely with hot rolled coils and is located near Maneely subsidiary Wheatland Tube.

Carlyle and Novolipetsk said those link-ups will help Novolipetsk cut about $35m in costs per year, as it uses the deal as an entry point into the US steel pipe and tube market.

Carlyle’s investment in the formerly family-owned John Maneely appears to have proved lucrative. During the relatively short period in which Carlyle and co-investor the Zekelman family owned the company, its sales grew by 36 per cent to an estimated $3bn in 2008.

Carlyle combined John Maneely with Atlas Tube not long after it purchased the company in 2006, and brought in new management and efficiency processes to help the business grow in a competitive industry in which Chinese manufacturers also play a big role.

Novolipetsk will finance the deal using a $1.6bn “pre export finance” facility and a $2bn bridge loan, which has been committed by Merrill Lynch, Deutsche Bank and Société Générale.

Merrill advised Novolipetsk, while JPMorgan, Goldman Sachs and GMP Securities advised John Maneely. Tom Conway, a vice-president at the United Steelworkers union, said in a written statement that the union was looking forward to working with John Maneely’s new owners.

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