Wheeling-Pitt, CSN Forge Ahead,
But Merger Faces Opposition
Wheeling-Pittsburgh Corp. and Mexico’s Companhia Siderurgica Nacional reaffirmed their commitment to merge last month when they entered into a definitive agreement for Wheeling-Pittsburgh to acquire the North American assets of CSN. The agreement reflects the strategic arrangement announced in August.
The merger faces opposition from at least one large shareholder, as well as Chicago-based Esmark Inc., which continued its takeover pursuit of the West Virginia steelmaker with a revised offer.
“This agreement marks a new beginning for steelmaking at Wheeling-Pittsburgh and in the Ohio and Monongahela valleys. We are confident that the agreement positions Wheeling-Pittsburgh to deliver sustainable earnings as well as solid future cash flows,” says James G. Bradley, chairman and CEO of Wheeling-Pitt. “CSN is a world-class, fully integrated steel producer with impressive margins and an enviable cash flow, and we look forward to partnering with them.”
Wheeling-Pitt stockholders, who are expected to vote on the proposed transaction in January, must still approve the agreement. One of the company’s largest shareholders, Tontine Management LLC, indicated that such support might be tough to find.
In a letter to Wheeling-Pittsburgh filed with the Securities and Exchange Commission, the management team at Tontine expressed dissatisfaction with the offers from both CSN and Esmark.
“From our perspective, and we believe from the perspective of many other of the company’s shareholders, the CSN and Esmark proposals, as currently structured, are unacceptable and, in the absence of dramatic enhancement, will be opposed by us in any vote seeking their approval,” wrote Jeffrey Gendell, Tontine Management LLC.
In response to the letter from Tontine and the Wheeling-Pitt-CSN announcement, Esmark officials have amended their proposal to include a nontransferable rights offering of up to $200 million of Wheeling-Pitt common stock to existing shareholders of Wheeling-Pitt. Esmark indicated that Franklin Mutual Advisers would be prepared to provide a “back stop,” acting as a standby purchaser of any stock purchase rights not exercised by existing Wheeling-Pitt shareholders.
“We have decided to amend the proposal to take into account the feedback we have received from large shareholders,” says Esmark Chairman and CEO James Bouchard. “Wheeling-Pitt investors would have the opportunity to further participate in the upside of creating one of the finest steel distribution companies in the U.S. through additional investments at a per-share price lower than the per-share price of Wheeling-Pitt stock received by Esmark shareholders in connection with a merger.”
Before the shareholders vote on the CSN proposal, they will meet in November to vote on a board of directors. Esmark is trying to get its slate of directors elected at the annual meeting Nov. 17. Tontine indicated it supports a change in management.
“We strongly believe that, given the alternatives that have emerged from the board’s strategic review process, and in the absence of a bona fide proposal to acquire the company outright for a full and fair value, the best course of action for the company and its shareholders is to terminate discussions with CSN, remain independent and immediately begin a search for a new senior executive management team,” Gendell wrote before the recent announcements.
If the new board allows the current management team’s proposed deal to go through, CSN will contribute its steel processing facility in Terre Haute, Ind., with current annual pickled and oiled, cold-rolled and galvanized products of 1 million tons; provide Wheeling-Pittsburgh exclusive U.S. and Canadian distribution rights for CSN’s flat-rolled steel products; and commit to a 10-year slab supply agreement, which will provide a long-term, guaranteed supply of high-quality slabs on favorable payment terms.
CSN will also contribute $225 million in cash, of which $75 million will be used to build a new energy-efficient furnace that would increase Wheeling-Pittsburgh’s hot-strip-mill capacity to 4 million tons, along with a second galvanizing line at Terre Haute. “This transaction will combine CSN’s modern North American assets, capital, slab supply and management expertise with Wheeling-Pittsburgh’s production capabilities to benefit all of our North American stakeholders,” says Marcos Lutz, CSN managing director for Infrastructure and Energy.
Upon completion of the deal, the existing Wheeling-Pittsburgh Corp. as well as CSN’s operating subsidiary in Terre Haute would become wholly owned subsidiaries of a new holding company, which intends to seek a North American stock exchange listing. A new board of directors would be created, which would include Bradley as chairman, two USW directors, five independent directors, and three directors designated by CSN. Wheeling-Pittsburgh’s current shareholders would receive 50.5 percent of the combined company. The remaining 49.5 percent would be held by CSN.
In conjunction with its amended proposal, Esmark announced it had reached an agreement with Duferco International Trading Holding Ltd. and Industrial Union of Donbass for those companies to make available up to 1.4 million metric tons of slabs on an as-needed annual basis beginning in the first quarter of 2007. The supply agreement would extend six years with a provision for automatic annual renewal thereafter and would be available in the event the proposed Esmark-Wheeling-Pitt combination is consummated.
Nucor Picks Memphis for New SBQ Mill
Nucor Corp., Charlotte, N.C., has selected Memphis, Tenn., as the site for the company’s new special bar quality products steel mill.
“We are looking forward to operating this facility in Memphis and expanding our presence in the southern United States. This growth project provides Nucor with an exciting opportunity to capitalize on a significantly better cost structure compared to key competitors in the special bar quality market, both domestic and foreign,” says Daniel R. DiMicco, Nucor’s chairman, president and CEO.
The facility, which will have an estimated annual capacity of 850,000 tons, will produce high quality carbon and alloy rounds and round-cornered squares from 2.25 inches to 9 inches for the automotive, heavy equipment and service center markets. It is expected to cost approximately $230 million and to employ more than 200 people.
“This facility complements our Nebraska and South Carolina SBQ mills and gives us one of the most diverse SBQ product offerings from 7/32 inch- to 9-inch rounds, all with a minimum of 5:1 reduction ratio,” says DiMicco.
In July, Nucor announced its plans to add a mill in the southern U.S. Start-up is expected to begin in the first quarter of 2008.
Rusal, SUAL, Glencore
Merging to Form World’s
Top Aluminum Producer
Rusal, SUAL Group, and Glencore International AG have agreed to merge their respective aluminum and alumina assets into United Company Rusal. The new company will become the world’s largest aluminum and alumina producer with an annual volume 4 million metric tons of aluminum and 11 million tons of alumina. The company claims it will account for approximately 12.5 percent of global aluminum and 16 percent of global alumina production, respectively.
Both based in Moscow, Rusal is the third-leading aluminum producer and SUAL Group is in the Top 10 worldwide. Switzerland-based Glencore is a natural resources company. The combined company will own bauxite mining, alumina refinery, aluminum smelting and foil production facilities.
The parties expect to complete the deal by April 1, 2007, subject to approval by antitrust regulators in Russia and a number of other countries, and the consent of other stakeholders.
The agreement also calls for the transformation of the new company into a public entity through an initial public offering on the London Stock Exchange within three years. The shareholders do not view an IPO as a goal in itself, but rather as an instrument to further expand and strengthen Rusal’s market-leading position in the global aluminum industry.
“This transaction is a logical step in our strategy of establishing the world’s leading aluminum company,” says Rusal Chairman Oleg Deripaska. “The combination of RUSAL, SUAL and Glencore’s alumina assets transforms the new group into a truly global company.”
Tata, Corus Combine
to Form 5th-Largest Mill
India’s Tata Steel has agreed to acquire Corus Group plc, a transaction that will create the world’s fifth-largest steel producer. Corus is Europe’s second-largest steelmaker, with production of 18.2 million tons from facilities in the UK and the Netherlands.
Corus is primarily engaged in the manufacture of semifinished and finished carbon steel products. Its activities are divided into three main divisions: strip products, long products and the distribution and building systems division. It also has a global network of sales offices and service centers.
The acquisition will be made by Tata Steel UK, a wholly owned indirect subsidiary of Tata Steel, recently incorporated in the United Kingdom for the purpose of completing the acquisition. A combination management team is expected to lead the merged company.
Tata Steel executives say the move is consistent with its stated goal of growth and globalization. The combination will give the company production facilities in Europe and Asia.
Timken Exits Seamless
Operation in Europe
The Timken Company, Canton, Ohio, will curtail its European seamless steel tube manufacturing operation in Desford, England. The company is in discussions with its employees to explore alternatives to closing the facility.
“The proposed action is part of the company’s strategy to focus on lines of business that produce differentiated products while driving profitable growth,” says Salvatore J. Miraglia, Jr., president of Timken’s Steel Group
The Desford facility generated sales of $85 million to $95 million in recent years, but has not been profitable. It manufactures seamless steel tube for machining and mechanical applications, serving the bearing industry in Europe.
People
Anne Stevens was named to succeed Robert J. Torcolini as chairman, president and CEO of Carpenter Technology Corp., Wyomissing, Pa. Stevens formerly held management positions at Ford Motor Co. Torcolini, who is retiring, will remain an advisor to Stevens and the board through Jan. 1, 2007.
SeverCorr, Columbia, Miss., has appointed Tom Marchak to serve as general manager of sales. Marchak had been vice president-commercial for Kenwal Steel, operating out of the company’s Burns Harbor, Ind., facility.
Lance Shelton has joined CMC Commonwealth Metals, Fort Lee, N.J., to head the strip sales team for Copper and Copper Alloy Products. Before joining CMC, he was national sales manager for PMX in Cedar Rapids, Iowa.
Del Tanner, chairman and CEO of Anderson Group Inc., has added the presidency of ESAB North America to his responsibilities. ESAB is a wholly owned subsidiary of AGI.
Executive Vice President and Chief Financial Officer Christopher Pickwood has announced his retirement from Novamerican Steel Inc., Montreal. Lawrence Cannon has been appointed to replace Pickwood.
Walker Magnetics Group Inc., Worcester, Mass., has announced the appointment of Richard Longo to the position of president and chief operating officer for worldwide company operations.
Briefs
AK Steel, Middletown, Ohio, has announced a capital investment to increase production capacity for high-quality, grain-oriented electrical sheet steels by about 12 percent. The $55 million expansion project will be used to upgrade and modify existing production equipment at the company’s Butler, Pa., and Zanesville, Ohio, facilities.
Northwest Pipe Co., Portland, Ore., has been selected to furnish approximately $22 million of large-diameter pipe for the Rio Colorado project in Baja California, Mexico. Northwest Pipe will supply approximately 27 miles of 54- and 60-inch diameter steel pipe to Administradora de Obras Y Concesiones, a Mexican corporation. This pipe will be primarily manufactured at Northwest Pipe’s Adelanto, Calif., plant with some components produced at the company’s Monterrey, Mexico, facility.
Nordural ehf, a wholly owned subsidiary of Century Aluminum Co., has energized all of the pots of its current expansion project at Grundartangi, Iceland. With this expansion, the company anticipates the plant will reach full rated capacity of 220,000 annual metric tons of aluminum by the end of the year, up from its previous rate of 90,000 tons per year.
Alcan Rolled Products, Ravenswood, W.Va., has signed an agreement with Bombardier Aerospace to supply the aircraft manufacturer with advanced lightweight aluminum products. The supply agreement will support Bombardier’s major aerospace programs including the CRJ Series and Q-Series regional aircraft, and Learjet family of business jets.
Moscow’s Rusal increased aluminum production by 2 percent during the first nine months of 2006 to 2.1 million tons. The company also increased production of value-added casthouse products by 12.5 percent, alumina by 2.1 percent and bauxite by 28.6 percent.
Laser specialists at Trumpf Inc., Farmington, Conn., have welded copper sheet metal five millimeters deep with a combination of disk lasers of varying laser power for the first time, the company claims. As a highly reflective material, copper is extremely difficult to weld and often results in undesirable side effects. In other action, Fabricating Equipment Co. was chosen as the machine tool distributor in southern Texas for Trumpf. Lynn Moore will continue to serve as Trumpf regional manager for the state.
Prima North America Inc. has completed a 20,000-square-foot expansion of its Manufacturing and Technology Center at company headquarters in Chicopee, Mass. The newly created space will support increased manufacturing of the company’s industrial lasers.
The Nanshan Group has chosen Belding, Mich.-based Granco Clark to supply the heating and handling equipment for two new SMS 1800-ton extrusion presses to improve production technology and expand capacity at its Shandong Province, China, facility.
