Why Steel Dynamics, Inc. Stock Jumped Today

Is this meaningful or just another movement?

Jul 21, 2014 at 5:13PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Steel Dynamics, (NASDAQ:STLD) jumped 12% today after acquiring a new asset.

So what: Steel Dynamics is buying a Mississippi steel plant for $1.625 billion from Russian company Severstal as part of the company's divestiture of U.S. assets. The plant will increase annual steel shipping capacity by 40% and gives the company one of the newest mini-mills in the country.  

Now what: Russian billionaire Alexei Mordashov controls Severstal and he may be trying to sell before sanctions increase on Russian companies due to the downing of flight MH17 in Ukraine. Russia's wealthy have been worried about sanctions and the timing may show that they're trying to cash out foreign assets quickly to maintain their wealth. For Steel Dynamics, the acquisition will be financed with a $1 billion bridge facility and is expected to result in $30 million in synergies. The bigger bet is that the new plant was bought at a fire sale price given the circumstances and over the next year or two Steel Dynamics will have to prove it was by increasing earnings.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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