U.S. Steel has entered an agreement to sell its freight rail subsidiary, Transtar, which operates six railroads including the Gary Railway Co., to Fortress Transportation and Infrastructure Investors for $640 million.

The sale, announced Tuesday and pending regulatory approval, includes a 15-year contract to continue the existing operations of the six railroads, which serve U.S. Steel and other companies by moving raw materials used in the steelmaking process, including iron ore, coal, coke and limestone. The railroads also haul steel within steel plants and to customers.

U. S. Steel President and CEO David Burritt said the sale fits the company’s long-term strategy by monetizing its railroad assets while creating a partnership that will continue the services the railroads provide.

“By selling Transtar to an experienced railroad operator, U. S. Steel can better focus on our broader ‘Best for All’ strategy,” he said. That strategy aims for profitable steel production while addressing the challenge of climate change.

The other Transtar railroads include the Lake Terminal Railroad Co. in Ohio, Union Railroad Co. in Pennsylvania, Fairfield Southern Co. in Alabama, Delray Connecting Railroad Co. in Michigan and the Texas & Northern Railroad Co. in Texas.

Fortress Transportation and Infrastructure Investors, or FTAI, noted that the facilities served by the railroads include Gary Works, U.S. Steel’s largest manufacturing plant, and Mon Valley Works in Pennsylvania, U.S. Steel’s lowest cost facility in the flat-rolled steel segment.

FTAI Chairman and CEO Joe Adams said the new partnership “allows us to significantly increase our rail business by providing essential rail services to one of the preeminent integrated steel producers in North America under a long-term contractual arrangement.”

FTAI invests in four market sectors, according to its website: aviation, energy, intermodal transport and rail.

Adams said the company expects to grow profits after the Transtar purchase through improved operations, new revenues for storage services to third-parties, new switching and repair services and new developments at four other rail properties included in the transaction.

Citi acted as U. S. Steel’s financial adviser on the transaction, with Jones Day and Baker & Miller acting as U. S. Steel’s legal advisers. Morgan Stanley and Barclays acted as financial advisers to FTAI and Sidley Austin acted as legal advisers.

Gary Railway Co.

The railroad operates on 63 miles of yard track in Gary, according to the company’s website. In addition to U.S. Steel, it provides services to four other companies located in the Gary Works complex: Tube City IMS, Brandenburg Industrial Service Co., South Shore Slag, and Cleveland-Cliffs steel plate mill.

What is now the Gary Railway Co. was originally part of the Elgin, Joliet and Eastern Railway formed in the late 19th century. Gary Railway began operations in 2009, when the majority of the EJ&E line was sold to Canadian National, while the Northwest Indiana portion remained with U.S. Steel subsidiary Transtar.

Gary Railway interchanges with CN in Gary, and other class 1 freight railroads on CN’s EJ&E line.

© Copyright 2021, nwitimes.com, Munster, IN