Nucor to buy Magnatrax for $280 million

Nucor Corp., the second-largest U.S.-based steel company, has agreed to buy Magnatrax Corp. for about $280 million to diversify from steelmaking and boost output of metal products used in nonresidential construction.

Meanwhile, Credit Suisse said Monday that Nucor and other "minimill" producers may outperform competitors next year as rising demand for steel and a slowdown in costs boost profit margins.

The Magnatrax transaction will add to earnings immediately and is expected to be completed during the third quarter, North Carolina-based Nucor said Monday in a statement.

Nucor is boosting its so-called downstream business, which makes products such as wire mesh and fasteners, to cut its reliance on cyclical demand for steel. Second-quarter profit will be lower than analysts expected because of a decline in shipments, the company said June 11.

Nucor has both a Vulcraft steel joint plant and a cold-finish plant in Brigham City and a bar mill in Plymouth.

"Nucor has been hinting broadly at a more favored strategy of moving downstream," said Michelle Applebaum, who runs a steel equities research firm in Highland Park, Ill. "I think we will see a lot more acquisitions along these lines."

The company made its largest acquisition Jan. 2, when it agreed to buy Canada's Harris Steel Group Inc. for $1.07 billion to add steel used to strengthen concrete and welded wire mesh manufacturing and distribution.

Magnatrax has seven manufacturing plants and engineering service centers across the U.S., Nucor said. Products include wall and roof panels, metal roofing and building components, Nucor said.

Nucor and producers such as Steel Dynamics Inc. are best placed to gain from rising prices because their scrap-metal costs won't gain, while rivals such as U.S. Steel Corp. may face a 25 percent increase in iron-ore prices, Credit Suisse analysts including Michael Shillaker said Monday in a note to investors.

Nucor, whose stock has risen about 11 percent this year compared with a 55 percent gain for U.S. Steel, has been hurt by rising costs for the scrap used in its electric arc furnaces. So-called integrated steel producers such as U.S. Steel rely on iron ore as the main raw material in production. A 25 percent increase in the price of ore next year likely will add $30 to the cost of making each ton of steel, Credit Suisse said.