United States Steel Corporation recently announced it is selling its Transtar business to a Fortress Transportation and Infrastructure Investors (FTAI) affiliate for $640 million.
“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.”
U.S. Steel will hold a 15-year contract to maintain the existing operations.
The sale benefits U.S. Steel in multiple ways. First, it aligns the company’s focus on its core mining and steelmaking business. Second, the financial structure will provide incremental value for stockholders by monetizing a non-core asset. Lastly, proceeds from the sale will further strengthen the company’s balance sheet.
Transtar comprises six operating railroads: Union Railroad Co. in Pennsylvania; Lake Terminal Railroad Co. in Ohio; Gary Railway Co. in Indiana; Delray Connecting Railroad Co. in Michigan; Texas & Northern Railroad Company in Texas; and Fairfield Southern Co. in Alabama.
The transaction is expected to close during the third quarter and is subject to customary closing conditions.