Worthington Steel Advances Acquisition Strategy with Key Financing Secured

Worthington Steel US9821041012

The proposed acquisition of German steel distributor Klöckner & Co. by Worthington Steel has moved decisively from a stated ambition into a concrete transaction. Recent regulatory filings and new financing agreements have provided substantial momentum, positively impacting the company's share price.

This acquisition represents a fundamental strategic shift for Worthington Steel. Integrating Klöckner’s extensive distribution and service network—comprising approximately 110 locations across North America and Europe—would elevate the combined entity to become the second-largest steel service center in North America. CEO Geoff Gilmore framed the deal as the culmination of a two-year search, identifying Klöckner as an ideal target for both geographic and product diversification.

The transaction has received a significant boost from the support of Klöckner’s largest shareholder. SWOCTEM GmbH, which holds a 42% stake, has committed to tender its shares to the offer.

Financing and Analyst Confidence

Two major uncertainties in any large-scale acquisition—financing and contractual details—have now been largely resolved. Worthington Steel has confirmed the signing of a definitive acquisition agreement and the commencement of a voluntary public tender offer for all outstanding Klöckner shares at €11.00 per share.

Crucially, the company has secured binding credit agreements totaling $1.9 billion from Wells Fargo and Citigroup. Furthermore, equity financing of up to €1.632 billion is in place. These steps have alleviated initial market concerns regarding the liquidity of the all-cash offer.

In response to these developments, analysts at KeyBanc reaffirmed their Overweight rating on Worthington Steel. They acknowledged the transaction will lead to higher leverage in the near term but emphasized that the long-term earnings potential of the merged company outweighs these temporary pressures. They view the deal as positioning Worthington Steel for aggressive growth within the small-cap industrial sector.

Financial Scale and Synergy Targets

The combined company is projected to generate annual revenue of approximately $9.5 billion. Management has identified annual synergies estimated at $150 million, which they expect to be fully realized by the end of the fiscal year 2028.

The Road Ahead: Regulatory Hurdles and Debt Reduction

Attention now turns to the regulatory approval process and the formal tender offer. Worthington Steel anticipates closing the deal in the second half of the 2026 calendar year, contingent upon achieving a minimum acceptance threshold of 65% of Klöckner’s shares.

Company leadership has already outlined post-acquisition priorities, with debt reduction taking immediate precedence. The goal is to reduce the projected net debt, estimated at roughly 4.0x EBITDA at closing, to below 2.5x within 24 months. The next concrete milestone will be the publication of the official offer document, pending approval from Germany’s Federal Financial Supervisory Authority (BaFin).