Beth offer for Lukens is surpassed Allegheny Teledyne is willing to pay $28 a share in cash

$715 million deal

400 plate mill jobs at Sparrows Point might not be lost

Steel industry

December 23, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

Allegheny Teledyne Inc. yesterday said it topped Bethlehem Steel Corp.'s offer for Lukens Inc., a development that could result in preservation of 400 jobs currently endangered at Bethlehem's Sparrows Point plant.

Pittsburgh-based Allegheny Teledyne Inc. said it would pay $28 a share in cash for Lukens, a Coatesville, Pa.-based steelmaker -- 12 percent more than Bethlehem's $25-a-share cash and stock deal.

"Your decision to sell to Bethlehem has created an obligation on your part to secure the best price for your stockholders," Allegheny Teledyne said in a letter to Lukens' board of directors.

"Our cash offer is clearly superior to Bethlehem's cash and stock offer."

The $715 million offer came a week after Bethlehem announced its proposed $650 million acquisition of Lukens, a deal aimed at improving the steel giant's competitiveness in a 12 million-ton steel plate market worth about $5 billion a year.

The Bethlehem-Lukens deal calls for closing two plate mills in about a year, including the Sparrows Point mill, which employs about 400 of the Baltimore County plant's 5,300 workers. That would leave Bethlehem with four plate mills.

Allegheny Teledyne, a group of technology-based manufacturers that makes specialty metals and products such as Water Pik shower heads, also wants Lukens' steel plate business. Like Bethlehem, the company would sell Lukens' stainless steel sheet and specialty metals businesses after the acquisition.

"Lukens' board of directors will consider the proposal in due course, consistent with its fiduciary obligations to the company's stockholders and its obligation" under the Bethlehem merger agreement, said R. W. Van Sant, Lukens' chairman and chief executive officer. The company declined to discuss a timetable.

Both companies offered to assume about $250 million in debt. But Bethlehem is offering cash for 62 percent of Lukens shares and common stock for the rest.

Bethlehem said it "has not had an opportunity to review the proposal" and that it will be "evaluating the situation."

The company declined to make any additional comment on a range of other topics, including the Sparrows Point plate mill.

"We're not in a position to respond to any of those scenarios right now," said Bethlehem spokeswoman Bette Kovach.

Bethlehem shares rose 62.5 cents to $8.4375 yesterday. Allegheny Teledyne's shares rose $1.375 to $25.3125. Lukens shares surged $4.50 to $28.50.

"Clearly, the better offer is Allegheny Teledyne's," said Richard A. Henderson, a steel industry analyst for Pershing, a division of Donaldson Lufkin & Jenrette. "It's higher and it's all cash."

Henderson said he thinks Bethlehem will now walk away. "I think they are between a rock and hard place," he said. "Allegheny is substantially stronger and has deeper pockets."

Bethlehem, which last year shed unprofitable businesses including its Sparrows Point shipyard, might not have the appetite for an auction. "I don't think they want to get in a bidding war," Henderson said. "They've made substantial progress, and I don't think they would risk that progress."

David S. MacGregor, a steel industry analyst with Midwest Research, disagreed. He said Bethlehem sees Lukens helping it become a huge player in the steel plate industry.

"I can't see them walking away from this," he said. "I wouldn't be surprised to see another round. The big winner here, of course, is the Lukens shareholder."

In their letter to Lukens, Allegheny Teledyne officials said they were "surprised and disappointed" with the proposed Bethlehem-Lukens deal. The company also said it had negotiated for more than a year, at Lukens' invitation, and that the two companies had reached an agreement.

Allegheny Teledyne officials told analysts that Lukens had verbally agreed to a $23.50-per-share offer. Then, Lukens accepted Bethlehem's $25-per-share offer without giving Allegheny Teledyne another chance.

One key difference in the deals, according to a source who insisted on anonymity, is their treatment of Van Sant. With Bethlehem, Van Sant would serve as president of Bethlehem-Lukens Plate Division. His position would be much less secure with Allegheny Teledyne, the source said. Lukens declined to comment on treatment of Van Sant in the competing proposals.

Workers at Sparrows Point yesterday said they found themselves shocked for the second time in a week.

"It seems like every day it's another surprise," said Frank Rose, president of United Steelworkers of America Local 2610. "We were kept in the dark on the plate mill until the merger with Lukens was announced."

Union officials urged Bethlehem to invest between $90 million and $150 million to improve the Sparrows Point plate mill if the Bethlehem-Lukens deal collapses. "They can't say they don't have the money," Rose said

Pub Date: 12/23/97

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