| July 2006 |  |
| Metal Industry News | |
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‘Reasonable Marriage’ of Mittal, “This is a reasonable marriage,” said Joseph Kinsch, chairman of the Arcelor board, during a joint press conference with Mittal officials June 26. “It took us about five months to persuade this bride, who is very young,” Mittal Steel President Lakshmi Mittal added with a smile. The proposed company, Arcelor-Mittal, would be far-and-away the largest steel company in the world, with a capacity of more than 120 million tons. The next largest can produce only 30 million tons. Arcelor officials said Mittal’s latest offer was 49 percent better than its initial offer in January. The offer was equal to 13 of Mittal shares and 150.60 euros in cash per 12 Arcelor shares. “Mittal Steel has revised its offer and brought in substantial changes,” Kinsch said. “Therefore, it’s natural for the board of directors of Arcelor to adopt the new proposal because it meets all the requirements we set.” Under the terms of Mittal’s revised offer, Arcelor would maintain a 50.5 percent share of the new company, with Mittal shareholders owning 49.5 percent—and the Mittal family owning 43.6 percent of the combined company. The industrial and corporate governance model would be based on Arcelor’s existing structure. The final deal was described by Mittal as a “merger of equals.” That Mittal and Arcelor eventually came to an agreement was no surprise to one analyst, though the speed in which the deal came together was unexpected. “I expected them to have a continued tussle,” said Karlis M. Kirsis, an analyst for World Steel Dynamics in New York. The future is uncertain for current Arcelor Chief Executive Officer Guy Dolle, who had been vocal throughout the takeover bid that Mittal and Arcelor were not a good fit. Though no CEO has been named, Dolle told Kirsch a new CEO should be selected. Dolle offered to remain on board to assist the integration of the two companies. Kirsch will remain chairman until his retirement. Lakshmi Mittal will become president and assume the chairman’s position at Kirsch’s retirement. The jilted suitor in the three-way discussions, Russia’s Severstal, responded with dismay at the news of the board’s decision. Severstal and Arcelor had agreed to a merger in May. “We have a legal, binding merger agreement that the board of Arcelor entered into. It has unanimously supported it to date, consistently affirming the industrial logic, the better business sense and the higher value creation behind our agreement on several occasions. In light of this, we are very surprised that the board did not invite us to discuss our revised proposal nor offer us an opportunity to respond as we had requested,” the statement from Severstal said. Kinsch, however, said that Arcelor would respect all commitments made in the negotiations with Severstal. Arcelor shareholders were scheduled to vote on the Severstal transaction on June 30. Severstal could revise its offer again, though Lakshmi Mittal said that any revised offer would have to be for the entire company. Kinsch said that if a counter offer from Severstal was “higher than 100 percent of the capital, the board would have to meet and discuss it.” Mittal, however, made it clear that his company had made its final offer. “We have absolutely no chance of further revising the offer. It has been accepted by Arcelor board,” he said. One area where the two companies have not reached an agreement is the future of Canadian steelmaker Dofasco. Arcelor believes Dofasco, which it acquired earlier this year, is an instrumental part of the company’s future. Mittal, however, made a binding agreement that would sell Dofasco to ThyssenKrupp in the event Mittal acquired Arcelor. “We have agreed to disagree,” said Aditya Mittal, Lakshmi’s son, who will serve on the Arcelor-Mittal management board. The actual future of Dofasco will be up to independent Dutch foundation Strategic Steel Stichting. Arcelor turned over control of Dofasco shares to the foundation shortly after the acquisition. Regardless of Dofasco’s ultimate owner, the Arcelor-Mittal merger will forever alter the nature of consolidation in the steel industry, Kirsis said. With the race for No. 1 over, future maneuvering will be done for more strategic or niche positioning and, in some cases, defensive efforts to protect against the threat posed by the new 120-million-ton giant. Additionally, the Arcelor-Mittal merger will likely have major ramifications in the still-fragmented Chinese steel industry, producing needed consolidation there, Kirsis said. “Their government is probably going to call its steel people in and say ‘This is what’s going to happen.’” Arcelor shareholders were scheduled to vote on the Mittal offer July 5, though that date may get pushed back. Tenaris, Maverick Merge Luxembourg-based Tenaris S.A. and Maverick Tube Corp., Chesterfield, Mo., have entered into a merger agreement through which Tenaris will acquire Maverick for $65 per share in cash. The merger is valued at $3.18 billion, including Maverick’s net debt. The transaction is subject to regulatory approvals, majority approval of Maverick’s shareholders and other customary conditions. “We are excited about joining forces with Tenaris. Maverick’s success in North America complements the strength of Tenaris in international markets. Moreover, the combined entity will be able to provide a broader array of products and services to our customers, positioning us better to compete in a highly competitive marketplace,” says Robert Bunch, chairman and CEO of Maverick. Maverick is a leading North American producer of welded oil country tubular goods, line pipe and coiled tubing for use in oil and natural gas wells. Its electrical products segment produces welded pipes for electrical conduits. With operations in the United States, Canada and Colombia, it has a combined annual capacity of two million short tons of steel pipes with a size range from one-quarter inch to 16 inches. Maverick has approximately 4,650 employees and in 2005 had sales of $1.8 billion, 82 percent from its energy products division. Tenaris is a leading global producer of seamless steel pipes for the oil and “This is a major step for Tenaris. With Maverick, we will gain full access to the energy sector in the United States and Canada. We will be able to support the growing requirements of our customers in the full range of applications from onshore shallow wells to extremely demanding deepwater wells in the Gulf of Mexico,” says Paolo Rocca, Tenaris chairman and CEO. Assuming the acquisition is completed, the combined entity would have annual sales of approximately $9 billion, of which approximately 30 percent would be in the United States and Canada. Phelps Dodge, Inco, Falconbridge Merger Phelps Dodge Inco will be the world’s leading nickel producer, the world’s largest publicly traded copper producer and a leading producer of molybdenum and cobalt. For the quarter ended March 31, the three companies had combined revenues of $6.3 billion and EBITDA of $1.9 billion. “This transaction represents a unique opportunity in a rapidly consolidating industry to create a global leader based in North America—home of the world’s deepest and most liquid capital markets. The combined company has one of the industry’s most exciting portfolios of development projects, and the scale and management expertise to pursue their development successfully,” says J. Steven Whisler, chairman and chief executive officer of Phelps Dodge. “The creation of this new company gives us the scale and diversification to manage cyclicality, stabilize earnings and increase shareholder returns. At the same time, we are committed to maintaining an investment-grade credit rating throughout the business cycle,” says Whisler, who will remain chairman and CEO of the new company. The corporate office and the new company’s copper division will be headquartered in Phoenix, Ariz. Inco Nickel, the company’s nickel division, will be headquartered in Toronto, Ontario. The Phelps Dodge board of directors also announced, as part of the transaction, a share repurchase program of up to $5 billion to be commenced after closing. Phelps Dodge Inco will have operations in more than 40 countries and will employ approximately 40,000 people globally. Phelps Dodge Inco will be listed on the New York Stock Exchange and will apply for a listing on the Toronto Stock Exchange. “This combination allows Inco’s shareholders, in addition to receiving a substantial premium for their stock, to share in the significant synergies both from our agreed merger with Falconbridge and from the combination with Phelps Dodge, and it creates an opportunity for all three groups of shareholders to participate in an exciting new, diversified industry leader,” says Scott M. Hand, chairman and chief executive officer of Inco. Inco and Falconbridge had already been in merger talks since November 2005. “This is an industry-redefining transaction. Phelps Dodge Inco will have the scale, diversification, market leadership, reserve position, growth profile and balance sheet necessary to create tremendous value for shareholders,” says Derek Pannell, chief executive officer of Falconbridge. Nucor Plans Fourth Galvanizing Line The annual capacity will be approximately 500,000 tons, and the facility will have the ability to produce a 72-inch wide sheet. Total cost will be approximately $150 million. Nucor Steel Decatur LLC, Nucor’s fourth sheet mill, was a bankrupt operation that was purchased and restarted in 2002. In August 2004, Nucor purchased a cold mill located next to the original facility. Construction of the galvanizing facility is expected to begin after satisfactory resolution of site location, regulatory ap-provals, tax matters and various contracts. “This is an opportunity to expand our galvanizing operations in the Southeast, matching the tremendous growth in that part of the country for sheet steel products,” says Dan DiMicco, Nucor’s chairman, president and CEO. Nucor’s other sheet galvanizing facilities are located in Indiana, Arkansas and South Carolina. “The cold mill has been a successful investment, and a new galvanizing line is an obvious next step at our Decatur operations. The automotive market in the Southeast continues to grow, and we are positioning ourselves to further service that market as well as other value-added markets,” says John Ferriola, Nucor executive vice president. New Bar Mill Planned in Argentina The high-efficiency mill is designed to roll special bar quality products for high-end industrial applications, including the automobile industry. Products range in size from 5.0 millimeters to 88.9 millimeters in rounds, squares, hexagons, flats and rebar. The new mill’s production is expected to be 500,000 tons per year, with commissioning projected for July 2007. Timken Expands Bar Capacity The rolled bar, developed for specific applications, features a consistent diameter along the full length of the bar, which will significantly improve the cutting of tight mult weights relative to using tapered cast ingots, Timken claims. Timken’s 13-inch round bar has more hot work than cast ingots and will allow for a more aggressive upset. Timken is the only domestic U.S. manufacturer to roll 13-inch round bar and can produce it in lengths up to 26 feet. The longer bar lengths will help reduce material handling by the customer and minimize testing costs, the company says. “At Timken, we are focused on expanding our capabilities to improve our customers’ performance,” says Rick Brown, director of advanced product and new business development for Timken’s Steel Group. Alcoa, Steelworkers Reach Labor Pact “This new agreement improves the competitiveness of these locations, and is a good outcome for our employees, the company, the communities in which we operate, and for our customers,” said Alain Belda, Alcoa chairman and CEO. “Both sides put a great deal of work into this agreement, The agreement covers workers at facilities in Badin, N.C.; Richmond, Va.; Massena, N.Y.; Wenatchee, Wash.; Davenport, Iowa; Louisville, Ky.; Alcoa, Tenn; Warrick and Lafayette, Ind.; Point Comfort and Rockdale, Texas; and Bauxite, Hot Springs and Gum Springs, Ark. Gerdau Acquires Sheffield Sheffield Steel is a minimill producer of long steel products, primarily rebar and merchant bar, with annual shipments of approximately 550,000 tons of finished steel products. Sheffield operates a melt shop and rolling mill in Sand Springs, a smaller rolling mill in Joliet, Ill., and three downstream steel fabricating facilities in Kansas City, Mo., and Sand Springs. The purchase price for the deal was approximately $103 million, plus the assumption of $84 million of debt and other long-term liabilities. ATI Expands Titanium Production Capabilities The $25 million Phase III expansion includes additional titanium sponge capacity and additional vacuum arc remelt capacity. The project is expected to be fully implemented by the third quarter of 2007. Thyssen Divests Castings Subsidiary The sale price was not disclosed. ThyssenKrupp Stahl employs 813 people. The sale of the aluminum castings operation is in line with restructuring plans ThyssenKrupp AG of Germany announced for its North American automotive segment. People Century Aluminum Co., Monterey, Calif., elected Steven Schneider senior vice president, controller and chief accounting officer. Schneider, who joined Century in April 2001, had been vice president and corporate controller. Bystronic Inc., Hauppauge, N.Y., has appointed Jeffrey Day as product manager of waterjet cutting systems. Day will be responsible for all marketing and product management activities in the United States, Canada and Mexico relating to Bystronic’s expanding waterjet product line. Joe Luczak was hired as vice president of sales for Struthers, Ohio-based Quality Bar’s turned, ground and polished cold bar facility. Luczak has 40 years experience in the steel industry. Thomas M. Walker joined Quanex Corp., Houston, as senior vice president of finance and chief financial officer. He had been executive vice president and chief financial officer of Alliant Energy Corp. Alexander D’Alfonso was appointed manager of international sales for Metform and the Bradbury Group, Mississauga, Ontario. He will provide assistance to agents and salespeople primarily in Latin America. J. Kenneth Rutherford was hired as chief financial officer by Stelco, Hamilton, Ontario. Rutherford joins Stelco from Cushman & Wakefield LePage Inc., where he was senior vice president and chief financial officer for the past three years. Briefs Nucor Steel Decatur LLC has signed a contract to implement IFS Applications 7 business software. The Alabama facility becomes the second Nucor plant to switch to IFS Applications, following Nucor’s plant in Jewett, Texas. Moscow-based aluminum producer Rusal announced the establishment of a joint working group with the Queensland State Government to develop power projects in Australia. The group will explore opportunities for the expansion of Rusal’s interests in Australia, the potential development of an aluminium smelter and the associated base-load generating capacity using alternative fuels. Alcoa’s Howmet Products and Services business has begun operating its new vacuum furnace in Whitehall, Mich. The new furnace, equipped with the latest control technology, will soon begin manufacturing production parts to meet demand in the aerospace market. “The combination of a booming market for jet engine components and growing customer demand for aerospace products has driven the need for a new furnace and full manufacturing capacity,” said Michael A. Pepper, vice president and general manager. Allegheny Ludlum, Pittsburgh, increased selling prices of cold-rolled and hot-rolled stainless sheet and strip products, including tubular quality, and stainless continuous mill plate and Precision Rolled Strip products by approximately 6 percent. Prices on stainless plate products also increased by 6 percent. The price increases went into effect with shipments beginning July 3. Atlas Holdings LLC, Green-wich, Conn., has completed the acquisition of Pangborn Corp., a manufacturer of surface preparation equipment. Pangborn designs, manufactures, markets and services shot blast machines, dust collectors and related products for the primary metal and metalworking industries. Commercial Metals Co., Irving, Texas, closed its purchase of the operating assets of Yonack Iron & Metal Co. and Metallic Industries LLC. Yonack operates scrap metal processing facilities in Dallas and Forney, Texas; Stroud, Okla.; and Lonoke, Ark. The previously announced acquisition of Bayou Steel, LaPlace, La., by an entity managed by Black Diamond Capital Management L.L.C. has been completed. The purchase price for Bayou Steel shares was $78.31. Brush Engineered Materials Inc., Cleveland, will honor Charles F. Brush III, who died June 1, with a scholarship program in his name. The Charles F. Brush III Scholarship provides $3,000 per year to four graduating high school seniors who have a parent employed by the company. Brush served as a member of the Brush Engineered Materials board of directors for more than 50 years. Indalex Holding Corp., Lincolnshire, Ill., has invested more than $7 million to install vertical and horizontal powder painting capability at its plant in Gainesville, Ga., to serve customers in the architectural and building and construction markets. The new powder paint lines will come on stream in the second quarter. Hourly employees at NS Group’s finishing facility in Oklahoma have approved a new five-year labor agreement. NS Group, Newport, Ky., is a producer of tubular products serving the energy industry and industrial markets. Talley Metals, a subsidiary of Carpenter Technology Corp., Wyomissing, Pa., has announced that it will begin to include copper in its raw material surcharge formula for certain copper bearing grades. The change in the surcharge went into effect July 1. |
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