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U.S. Steel (X) to Divest Transtar to Fortress for $640 Million

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United States Steel Corporation (X - Free Report) recently announced its agreement to sell Transtar, LLC to an affiliate of Fortress Transportation and Infrastructure Investors LLC for $640 million. The deal is expected to be completed in the third quarter of 2021, subject to customary closing conditions that includes receipt of specific regulatory clearances.

This sale will help U.S. Steel to focus on its core mining and steelmaking business under its Best for All strategy. It will also provide the company with a new financial structure that adds immediate incremental value for U.S. Steel shareholders by monetizing a non-core asset.

U.S. Steel intends to use the proceeds of the divestment to further strengthen its balance sheet, including deleveraging.

U.S. Steel is also expected to receive an initial 15-year contract to maintain the existing operations at the six operating railroads that make up Transtar. The strong partnership with FTAI will ensure continued support of its steelmaking facilities with predictable and cost-effective railroad operations, the company noted.

Citi played the role of U.S. Steel’s exclusive financial advisor on this deal. Jones Day and Baker & Miller PLLC acted as its legal advisors.

Shares of U.S. Steel have surged 228.5% in the past year compared with 166.1% rise of the industry.

Zacks Investment ResearchImage Source: Zacks Investment Research

U.S. Steel, in its last earnings call, noted that it is well placed to translate earnings into cash flow on the back of a strong market and its disciplined approach to capital allocation.

 

Zacks Rank & Key Picks

U.S. Steel currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Nucor Corporation (NUE - Free Report) , Olin Corporation (OLN - Free Report) and Cabot Corporation (CBT - Free Report) .

Nucor has a projected earnings growth rate of around 260% for the current year. The company’s shares have surged 171.2% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Olin has an expected earnings growth rate of around 473.3% for the current year. The company’s shares have skyrocketed 278.3% in the past year. It currently sports a Zacks Rank #1.

Cabot has an expected earnings growth rate of roughly 126% for the current fiscal. The company’s shares have surged 78.6% in the past year. It currently sports a Zacks Rank #1.

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