| June 2006 |  |
| Metal Industry News | |
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Arcelor
Agrees to Acquire Severstal, Mittal
appeared undeterred, however, winning approval of a merger with
Arcelor from European antitrust regulators in early June, provided
Mittal divests itself of three European steel facilities. Addressing
another stumbling block, Mittal also agreed to share its business
plan with Arcelor in hopes of a friendly acquisition. Arcelor officials
maintained that they needed the business plan to accurately gauge
the value of Mittal’s shares. The
combination of Arcelor and Severstal would result in a steel giant
with $46 billion in annual sales and 70 million tons of production,
based on each company’s 2005 results. “The
merger with Severstal represents a breakthrough transaction for
Arcelor that positions the combined company in the forefront of
the international steel industry,” says Guy Dolle, Arcelor
CEO. “The transaction is consistent with Arcelor’s strategy
of value before volume, and was negotiated in the best interest
of both groups.” Some
minority shareholders disagree, believing the offer is not in the
company’s best interests. That’s an opinion shared by
a prominent analyst.
“I don’t think it’s as good a combination as Arcelor-Mittal,”
says analyst Charles Bradford, president of Bradford Research, New
York. “The Mittal deal offered a lot more savings in cost.” The
Arcelor-Severstal deal was announced less than two weeks after Mittal
Steel upgraded its latest offer for Arcelor. Mittal’s new offer
called for one Mittal share and $11.10 in cash for one Arcelor share;
or 17 Mittal shares for every 12 Arcelor shares; or $37.74 cash
for each Arcelor share. “We
have announced a materially improved offer, providing an exceptionally
attractive premium to Arcelor shareholders,” said Lakshmi N.
Mittal, chairman and CEO of Mittal Steel at the time of the upgraded
offer. “Not only are we offering a very significant increase
in the cash component, but also a greater participation in the combined
company.” As
of press time, the market was watching to see if Arcelor would proceed
with its acquisition of Severstal, and if Mittal would maneuver
to acquire them both. Rather
than take Mittal’s initial offer, Arcelor’s leadership
opted to merge with Severstal in a deal that values Arcelor at $44
per share, representing a premium of 100 percent over Arcelor’s
closing price on Jan. 26, the day before Mittal Steel announced
its hostile offer, and 36.6 percent over Arcelor’s closing
price ex-dividend on May 25. Bradford
disputes the value of Arcelor, saying that officials had previously
made a case for five times EBITDA, and now are valuing it at six
times. “It’s pure fiction,” he says. Under
terms of the agreement, Alexey A. Mordashov, Severstal’s controlling
shareholder, would contribute his economic interests in Severstal’s
steel business (including Severstal North America), as well as Severstal-Resource
(iron ore and coal assets) and his ownership interest in Italian
steelmaker Lucchini to Arcelor. He would also contribute a cash
payment of $1.25 billion to Arcelor in exchange for 295 million
newly issued Arcelor shares at a price of $44 per share. Unless
more than 50 percent of Arcelor’s currently outstanding shareholders
oppose the transaction, the deal will go forward and is expected
to be finalized by the end of July. “That’s
an impossible standard to meet,” says Bradford, pointing out
that no more than 35 percent of outstanding shareholders have ever
participated in previous votes. “Some of what Arcelor is doing
is not in the shareholders’ best interests.” Investment
bank Goldman Sachs, one of the banks that would provide financing
for the Mittal takeover, has gotten involved in the Severstal-Arcelor
deal. Goldman Sachs is reportedly contacting Arcelor’s minority
shareholders in an attempt to force a more traditional vote on the
sale. Severstal’s
operations here include Severstal North America (formerly Rouge
Steel Co.) in Dearborn, Mich.; part ownership of the coke mills
of Wheeling-Pittsburgh Steel Co. and its interest in the SeverCorr
minimill scheduled to open in Mississippi in 2007. “Arcelor is a superb company with highly successful management and world-class assets that produce extremely high quality products,” says Mordashov, who will own 32 percent of the combined Arcelor-Severstal. “Severstal’s top management team, highly profitable assets and low cost operations, together with Arcelor’s attributes, will position the combined company to lead the way in the consolidation of the steel industry.” Bayou
Steel to Merge with Black Diamond “We
at Bayou Steel are very pleased that our stockholders overwhelmingly
approved this transaction with Black Diamond,” says Jerry Pitts,
president and CEO of Bayou Steel. Black Diamond will pay a per-share
purchase price of $78.31 in cash. Bayou
Steel manufactures light structural and merchant bar products in
LaPlace, and Harriman, Tenn. The company also operates stocking
locations along the inland waterway system near Pittsburgh, Chicago
and Tulsa, Okla. Black Diamond is an $8 billion asset management firm founded in 1995 by its principals James Zenni and Stephen Deckoff. PTC
Restructures Debt Under Chapter 11 Company
officials say the plan has received strong support from secured
lenders and a majority of voting stockholders. PTCAlliance took
this action to reduce its long-term debt so that it can take advantage
of the fundamental strength of its business operations with a stronger
balance sheet, officials said. The filing is entirely at the parent
company level, they added; none of the company’s subsidiaries
in the U.S. and Germany are included in the filing, nor are they
subject to the requirements of Chapter 11. Under
the pre-packaged plan of reorganization filed with the court, the
company’s senior lenders have agreed to a restructuring in
which they will receive all of the equity in the reorganized company.
PTCAlliance expects the Bankruptcy Court to confirm the pre-packaged
plan of reorganization within 90 days of the filing, and the company
to emerge from Chapter 11 shortly thereafter. “This
is a positive step for PTCAlliance,” says Peter Whiting, company
chairman and CEO. “The debt restructuring, once fully implemented,
will allow us to take full advantage of the fundamental strength
of our operations and make the necessary investments in developing
and growing our business. We will have a much improved balance sheet
and a capital structure that is more appropriate for the cyclical
nature of our business.” In
conjunction with the pre-packaged Chapter 11 filing, PTCAlliance
has received a commitment from a group of lenders led by one of
the company’s current senior lenders, Black Diamond Commercial
Finance, for up to $70 million in debtor-in-possession financing
to fund the company’s operations during the Chapter 11 proceedings. “We
are very gratified that our senior lenders recognize the value in
PTCAlliance and appreciate their support of our restructuring initiatives,”
Whiting said. “Since
2002 we have taken a number of steps to improve operations,”
Whiting continued. “We
have reopened our Hopkinsville, Ky., plant, reorganized into business
units, implemented our Six Sigma and Customer Intimacy programs
and made major investments in several of our divisions. As a result,
we have reduced costs, improved quality and customer service and
significantly increased revenues. “Despite
these significant operational improvements,” he added, “we
still face debt levels that are too high for our business. We need
to streamline our balance sheet in order to restore our financial
stability and continue to compete in our industry.” Whiting
emphasizes that PTCAlliance will continue operating under Chapter
11 in the ordinary course of business and that the restructuring
should not have any impact on employees, suppliers, customers and
other business partners. “With the progress we’ve made
in strengthening our operations, PTCAlliance is well positioned
to emerge from Chapter 11 as a growth-oriented, competitive, profitable
company.” Alcoa
and USW Reach The
agreement covers approximately 9,000 Alcoa workers at facilities
in Warrick and Lafayette, Ind.; Badin, N.C.; Richmond, Va.; Massena,
N.Y.; Bauxite, Hot Springs and Gum Springs, Ark.; Wenatchee, Wash.;
Davenport, Iowa; Louisville, Ky.; Alcoa, Tenn.; and Point Comfort
and Rockdale, Texas. Among
items covered in the agreement include wage and benefits packages;
a revamped health care plan for current employees and retirees;
a performance pay program; skills assessment and worker training;
and mechanisms for joint labor/company initiatives. Century
Exploring Bauxite Several
studies will be conducted to assess the quality and quantity of
bauxite reserves. The parties estimate the mine and alumina refinery
could be operational within three years following the completion
of the feasibility study. “Growing
upstream into bauxite and alumina is central to our strategy,”
says Century Aluminum President and CEO Logan W. Kruger. “
It is good to be working in Jamaica where we already have a presence,
and we appreciate the support we have received so far from the Jamaican
government.” Nucor
expects the new facility to cost approximately $27 million and to
employ more than 200 people. Nucor currently has building systems
facilities in Indiana, South Carolina and Texas with a combined
annual capacity of more than 145,000 tons. “We
look upon this new facility as an opportunity to expand our metal
building systems presence in the western United States,” says
Daniel R. DiMicco, Nucor’s chairman, president and CEO. “It
has always been our intention to be a larger player in the pre-engineered
metal buildings industry. The addition of this fourth plant will
increase our capacity by more than 30 percent,” says Hamilton
Lott Jr., executive vice president. Scrap
Metal Site Opening in Illinois “The
new yard operation will allow us to improve on the quality of the
products that we process, and expand our product mix for our consumers,”
says Jeffry Gertler, SMS president. The
site provides for access to rail transportation, and is located
close to Northwest Indiana’s steel-making district, which will
consume the majority of the volume processed from the new facility.
Future plans for the facility include a non-ferrous warehouse and
recycling center, and scrap processing and handling equipment. People Joseph
P. Bellino was hired as executive vice president and CFO at Kaiser
Aluminum, Foothill Ranch, Calif. Bellino had been CFO and treasurer
at Steel Technologies Inc. for the previous nine years. “Joe
will be a significant asset to the company as he has a tremendous
depth of expertise in finance as well as a solid background in metals
and manufacturing,” says Jack A. Hockema, president and CEO
of Kaiser Aluminum. “He will immediately step in and help guide
the company through a critical time as we emerge a new company with
a solid platform for growth.” Kaiser Aluminum officials believe
the company may emerge from bankruptcy court during the second or
third quarter. Alcoa
is expanding its presence in China with the creation of two new
positions. Randy E. Phillips was appointed to the new position of
president, China Corporate Development, and Bob Larson was named
president, China Mill Products. Rudi Huber was named president of
Alcoa’s European Region. He replaces Alcoa Executive Vice President
Ric Belda, who is retiring after 38 years. William
E. Vaughan retired as chief financial officer at Stelco Inc., Hamilton,
Ont., May 20. Vaughan spent 38 years with the Canadian steelmaker. Briefs Aleris
International Inc., Beachwood, Ohio, will purchase the $1.8 billion
downstream aluminum business of Corus Group plc. The transaction
will include Corus’ aluminum rolling and extrusion businesses,
but will not include the company’s primary aluminum smelters.
The transaction is expected to be completed in the third quarter. Alcan
Inc. has secured 40 percent of the energy required for a potential
280,000-ton-per-year expansion of its ISAL smelter in Straumsvik,
Iceland. Alcan will purchase 200MW of geothermal power from Reykjavik
Energy, beginning in 2010 and lasting 25 years. Magnetek
Material Handling, Milwaukee, was named a member of the Crane Manufacturers
Association of America. Member companies represent industry leaders
in the overhead crane market. Gautier
Steel Ltd., Johnstown, Pa., a producer of carbon and alloy rolled
flats, sharp cornered squares and special sections, is upgrading
its computer systems with the AXIOM Enterprise Management System
from AXIS Computer Systems Inc., Marlborough, Mass. AXIOM is a business
and manufacturing system built around the operational requirements
of metals producers, processors and service centers After
rejecting an initial agreement in April, employees at the Hawesville,
Ky., plant ratified a collective bargaining agreement with Century
Aluminum of Kentucky LLC, a wholly owned subsidiary of Century Aluminum
Co. The agreement covers 600 employees represented by the United
Steelworkers and extends through April 1, 2010. |
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