8-K: Worthington Steel to Acquire Kloeckner & Co for €11/Share

Worthington Steel, Inc. announced a definitive agreement to acquire German-listed Kloeckner & Co SE for €11 per share, creating the second-largest steel service center in North America.

Summary

• Worthington Steel, Inc. (WST), through its German subsidiary Worthington Steel GmbH (Bidder), has entered into a Business Combination Agreement (BCA) to acquire Klöckner & Co SE (Kloeckner).
• The Bidder will launch a voluntary public cash takeover offer to Kloeckner shareholders at a price of €11.00 per share.
• SWOCTEM GmbH, Kloeckner's largest shareholder with approximately 42% of shares, has irrevocably committed to tender its shares into the offer.
• The offer is subject to several conditions, including obtaining required regulatory approvals (merger, investment control, EU foreign subsidies) and a minimum acceptance threshold of 65% of Kloeckner's issued share capital.
• The transaction is expected to be completed in the second half of calendar year 2026.
• Worthington Steel expects to finance the acquisition through a combination of cash on hand and new debt financing, with US$1.9 billion in debt financing commitments secured from Wells Fargo and Citigroup.
• The offer is not subject to any financing condition.
• An amendment to Worthington Steel's Revolving Credit Agreement permits the company to consummate the offer and related transactions.

Sentiment

Score: 8

Explanation: The filing outlines a strategic and financially beneficial acquisition for Worthington Steel, with clear synergy targets, positive EPS accretion, and a strong commitment from Kloeckner's largest shareholder. While integration and regulatory risks exist, the overall tone and projected outcomes are highly positive.

Positives

• The acquisition is expected to create the second-largest steel service center company in North America with over $9.5 billion of combined revenue.
• Anticipated to generate an estimated $150 million of highly actionable, identified annual run-rate synergies, fully realized by the end of Worthington Steel's fiscal year 2028.
• The transaction is expected to be substantially accretive to Worthington Steel's earnings per share (EPS) within the first full year of operation.
• Strengthens Worthington Steel's strategic offerings in key product categories and regions, diversifying its product portfolio, end markets, and geographic footprint across North America and Europe.
• Kloeckner's Management and Supervisory boards welcome the offer and intend to recommend acceptance by shareholders.
• The acquisition provides a platform with multiple avenues for accelerated future growth.

Risks

• Ability of the parties to successfully complete the proposed acquisition on anticipated terms and timing, including obtaining required regulatory approvals and other conditions.
• Ability of the parties to achieve the minimum requisite acceptance threshold of Kloeckner's issued share capital (65%) at the end of the acceptance period.
• Financing arrangements relating to the acquisition, including the ability to secure permanent financing subject to market conditions.
• Effects of the transaction on Worthington Steel's and Kloeckner's operations, including the combined company's future financial condition, performance, operating results, strategy, and plans.
• Potential impact of the announcement or consummation of the proposed acquisition on relationships with customers, suppliers, and other third parties.
• Ability of the combined company to achieve the anticipated cost synergies or accretion to earnings per share.
• Potential for Kloeckner's existing debt financing arrangements to trigger termination rights due to a change of control, requiring refinancing (up to €450 million).

Future Outlook

Worthington Steel expects the acquisition to significantly enhance its position in the North American metal processing sector, creating a larger and more diversified leader. The combined company aims for over $9.5 billion in revenue and margins above 7%, with $150 million in annual synergies fully realized by fiscal year 2028. The transaction is projected to be substantially accretive to Worthington Steel's EPS within the first full year, with a focus on deleveraging to below 2.5x net leverage within 24 months post-closing. Kloeckner's existing 'Step Up 2030' strategy, focusing on higher value-added services, will be supported and accelerated.

Management Comments

• "This is a strategic and transformative step in Worthington Steel's growth journey. Through the acquisition of Kloeckner & Co, we will enhance our offerings in high-value metals processing and create meaningful value for our shareholders, deeper relationships with our customers and suppliers, and growth opportunities for our employees." Geoff Gilmore, Worthington Steel president and CEO.
• "Worthington Steel and Kloeckner share a focus on operational excellence, innovation and disciplined execution. By integrating Kloeckner's capabilities in North America and Europe, we will be stronger together, building a more resilient business and driving shareholder value." Geoff Gilmore, Worthington Steel president and CEO.
• "This transaction is the right step for Kloeckner & Co as we continue to build on our strengths and position our business for the future." Guido Kerkhoff, CEO of Kloeckner & Co.
• "Worthington Steel brings complementary capabilities, a highly respected reputation and an experienced leadership team that shares our focus on operational excellence and strategic growth. The combination of both companies offers compelling value to all our stakeholders, and we are excited that Kloeckner will be even better positioned to execute our strategic plan, serve our customers and support the long-term success of our people." Guido Kerkhoff, CEO of Kloeckner & Co.

Industry Context

This acquisition represents a significant consolidation in the steel service center industry, positioning Worthington Steel as the second-largest player in North America by revenue. It aligns with Kloeckner's ongoing strategy to transition towards higher value-added processing and fabrication, a trend seen across the metals industry to move beyond basic distribution. The geographic diversification into Europe also provides Worthington Steel with a broader market presence and potential for shared best practices across continents.

Comparison to Industry Standards

• The combined entity is projected to become the second largest steel service center company in North America by revenue, indicating a significant market position.
• The target of maintaining margins above 7% post-acquisition, including synergies, suggests a focus on profitability that aligns with leading industry players.
• The implied EV/EBITDA multiple of 5.5x considering synergies is a favorable valuation for an acquisition of this scale, potentially indicating efficient pricing or strong synergy potential compared to typical industry multiples for growth-oriented transactions.

Corporate Governance

Related Party Transactions

• SWOCTEM GmbH, Kloeckner's largest shareholder (approximately 42% of shares), has entered into an Irrevocable Undertaking with Worthington Steel GmbH, committing to tender its shares into the offer. Friedhelm Loh, associated with SWOCTEM GmbH, indirectly holds Kloeckner Shares which are subject to a separate agreement regarding tendering.

Stakeholder Impact

• **Shareholders (Worthington Steel):** Expected to benefit from substantial EPS accretion, significant synergies, and increased market scale, driving long-term value.
• **Shareholders (Kloeckner & Co):** Offered a cash consideration of €11.00 per share, with the Management and Supervisory boards recommending acceptance. Potential for delisting and squeeze-out for remaining minority shareholders.
• **Employees (Kloeckner & Co):** Management Board and executive leadership expected to remain in place. Worthington Steel intends not to initiate lay-offs or plant closings and to respect existing employee agreements and rights.
• **Customers & Suppliers:** The combined entity aims for deeper relationships and more compelling customer solutions through an enhanced product offering and broader geographic reach.
• **Creditors:** Existing debt financing commitments of US$1.9 billion and an equity commitment of €1.632 billion ensure the offer is fully financed. Kloeckner's existing debt (up to €450 million) may be refinanced.

Next Steps

• Worthington Steel GmbH to publish the Offer Document after approval by the German Federal Financial Supervisory Authority (BaFin).
• Initial acceptance period for the offer to begin upon publication of the Offer Document, lasting up to five weeks.
• An additional, statutory two-week acceptance period will follow the initial period.
• Completion of the offer is expected in the second half of calendar year 2026, subject to regulatory approvals and minimum acceptance.
• Worthington Steel to hold an investor and analyst call on January 16, 2026, to discuss the acquisition.
• Post-closing, Kloeckner agrees to support further integration measures, such as a domination and profit and loss transfer agreement and/or a squeeze-out of remaining minority shareholders, if ownership thresholds are met.
• Worthington Steel will focus on deleveraging to reach net leverage levels below 2.5x within 24 months after closing.
• Kloeckner's Becker Group is subject to a strategic exit review and will be classified as an asset held for sale for Q1 2026 financial statements.

Key Dates

Recommendation

The acquisition of Kloeckner & Co by Worthington Steel is a highly strategic and transformative move. The projected $150 million in annual run-rate synergies, coupled with the expectation of substantial EPS accretion within the first full year, indicates significant financial upside. The creation of the second-largest steel service center in North America provides enhanced scale, diversification, and market leadership. The fixed offer price for Kloeckner shares, combined with the irrevocable commitment from Kloeckner's largest shareholder, reduces execution risk. While integration and regulatory approvals are still pending, the robust financing commitments and the positive outlook from both management teams suggest a strong path forward, making Worthington Steel an attractive 'strong buy' for long-term investors.

Keywords

Worthington Steel, Kloeckner & Co, Acquisition, Takeover Offer, Steel Service Center, Metal Processing, Merger, Synergies, North America, Europe, SEC Filing, 8-K, Corporate Governance, Debt Financing, Regulatory Approval