WHX is planning to keep BethShip's present management Likely purchaser also talking of seeking new business

February 11, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

WHX Corp., the likely buyer of BethShip Inc., would keep the management of the Sparrows Point repair yard and seek new business in major ship conversions and possibly in new shipbuilding, a top company official said yesterday.

"This is an attractive business, as is," said Paul Bucha, a WHX corporate director leading the company's efforts to acquire BethShip.

"It has been operating at a profit in spite of difficult constraints put on it by Bethlehem Steel. It's been a poor orphan in their business."

Bethlehem Steel Corp. told union officials Friday that it had chosen WHX Corp. as the buyer of the yard over a group led by attorney and Baltimore Orioles chief executive Peter Angelos. Bethlehem and WHX must still negotiate the details of an agreement. The yard is to be closed if it isn't sold.

Union officials said the company, which would not comment on WHX, rated the prospects of a sale at 99 percent.

Bucha said yesterday that WHX wouldn't be talking with Bethlehem unless it thought it could seal a deal to buy the yard. "We're optimistic and we're excited about it," he said.

According to an official close to the situation, Angelos' group submitted the lowest of three final bids for the yard -- about $20.5 million.

Veritas, a New York-based investment and turnaround firm, wanted the yard for about $23 million. WHX is willing to pay about $27.5 million. Bethlehem's asking price was about $30 million, according to several sources.

WHX, the parent company of Wheeling-Pittsburgh Steel Corp., is the eighth largest integrated steel manufacturer in the country.

Wheeling-Pittsburgh is currently in the fourth month of a strike against its plants in West Virginia, Ohio and Pennsylvania by 4,500 members of the United Steelworkers of America. The two sides are fighting over pension benefits.

In addition to making hot-rolled and cold-rolled sheet steel, WHX manufactures a variety of fabricated steel products for the construction, highway and agricultural markets.

The company has also owned nonindustrial interests. WHX has bought and sold a handful of radio stations over the past three years. It now owns Wheeling Downs, a dog racing track in Wheeling, W.Va.

But steel accounts for the overwhelming majority of WHX's 6,000 employees.

Richard Aldrich, a Lehman Brothers analyst, said WHX has a strategy of building its value-added steel business. "They basically are moving toward finished products," he said.

He said the company has about $400 million in cash, plenty for acquisitions. "I'm not sure what the synergies are with BethShip," he said.

Charles Bradford, a steel industry analyst for UBS Securities Corp., said WHX has largely succeeded in turning around Wheeling-Pittsburgh Steel, which declared bankruptcy in 1985 and was reorganized in 1991.

He said Wheeling Pittsburgh has earned profits from operations in each of the last five years except 1992, when its loss was lower than those of most steelmakers.

According to industry analysts, the company's defined-contribution plan helps keep costs low.

In such plans, employer and employee both contribute into an investment pool, and the performance of the investment determines the employee's retirement benefit.

The steelworkers want a defined-benefit plan similar to those at other steel companies. Such plans are funded entirely by the employer and then provide specific monthly retirement payments, based largely on years of service.

Workers at BethShip, who will have to negotiate a pact with the yard's new owner, have defined benefit plans. Bucha declined to discuss WHX's plans for BethShip workers. He said such talk was premature.

"The real question is what form can pay the highest benefits over the longest haul at the lowest cost," he said.

He also said WHX has had good relations with workers at Wheeling-Pittsburgh, despite the strike. "This happens to be an issue over the form of pension fund," he said. "It's not about whether there should be union jobs."

Murphy Thornton, the president of the union that represents most of BethShip's workers, declined to comment on the WHX strike.

"The next step for the membership is to get together and see that we're reading from the same sheet of music," he said.

Bucha said Bethlehem limited BethShip's potential by restricting its bids for long-term work. "If you look at it on a cost-basis, you can make money in this business," he said.

"And the more more we looked at it, the more we saw that it makes sense because of the possibility of synergies."

One possibility is making steel for ships. Another is using some of the yard's idle property to distribute some products.

Bucha dismissed speculation that the company would abandon ship repairs. "What else would you buy this for?" he asked.

"This is a shipyard in the ship repair business. I can't imagine any other reason you would be interested in it."

"It's definitely going to stay in ship repairs and hopefully expand so that it does major ship conversions," he said. "Once you've gotten it modernized and do major repairs and new business, the next step is new building. Is that where we want to be? Not necessarily."

But he said WHX wouldn't rule that out. Bucha spoke highly of BethShip president David Watson and said WHX would keep the yard's current management team. He said WHX's primary goal would be "to make it a going concern."

He said WHX would like to put an end to the practice of laying off workers for months at a time. "That's not very efficient," he said.

Pub Date: 2/11/97

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