Beth Steel wins battle for Lukens 400 jobs will be lost as Sparrows Point plate mill is closed

$740 million deal

Allegheny Teledyne obtains 3 agreements, agrees to walk away

January 29, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Bethlehem Steel Corp. said yesterday that it had prevailed in a six-week bidding war for Lukens Inc., assuring the closure of its Sparrows Point plate mill.

Bethlehem, which will pay $740 million for Coatesville, Pa.-based Lukens, will close the Baltimore County mill in about one year. The mill's 400 workers had held out hope that Allegheny Teledyne Inc., the other suitor, would buy Lukens and scuttle Bethlehem's plans.

But the two rivals eliminated that possibility yesterday when they announced a series of agreements under which Bethlehem will acquire Lukens and then sell some of its stainless steel assets to Pittsburgh-based Allegheny Teledyne.

The sale is expected to be completed in the second quarter.

"It pretty much looks like the demise of the plate mill," said Gary Valentine, treasurer of United Steelworkers of America Local 2610. "We were really hoping we could convince Bethlehem to keep the mill and put money into it if Bethlehem didn't get Lukens."

The announcement came as Bethlehem reported fourth-quarter earnings of $31.3 million, compared with a loss of $357 million in the year-ago quarter, which included $370 million in restructuring charges. On a per-share basis, earnings were 28 cents compared with a loss of $3.19 last year. Sales for the three months ended Dec. 31 were $1.12 billion, down about 2 percent from the year-ago period.

For the year, Bethlehem reported net income of $239 million, or $2.13 a share, compared with a loss of $351 million, or $3.15 a share, the previous year. Sales were $4.63 billion, down 1 percent.

To raise profits, Bethlehem announced plans Dec. 15 to acquire Lukens for $650 million and close the plate mill. The offer called for Bethlehem to pay $25 in stock and cash for each share of Lukens common stock, a total of about $400 million, and assume $250 million in debt.

Bethlehem was attracted to Lukens because a merger would allow the combined company to close two of six plants -- including the Sparrows Point mill -- and produce the same amount of steel plate the two companies made individually, about 2.2 million tons a year. Steel plate accounts for about 15 percent of Bethlehem's $4.63 billion in annual sales.

The acquisition would make Bethlehem the No. 1 domestic producer of steel plate, which is used in shipbuilding and agricultural and industrial equipment.

A week after Bethlehem announced the deal, Allegheny Teledyne weighed in with a $715 million cash offer, or $28 per share. Bethlehem came back with its prevailing $740 million bid -- or $30 a share, 68 percent in cash and 32 percent in stock -- plus the assumption of debt on Jan. 5.

Analysts and union officials predicted that Allegheny Teledyne would come back with a higher offer. Investors apparently agreed, driving shares of Lukens Inc. solidly above $31.

After weeks of silence from both companies, Bethlehem and Allegheny Teledyne emerged yesterday with three major agreements:

Allegheny Teledyne will pay $175 million for the Houston, Pa., plant of Lukens' Washington Steel division, which is used for melting, casting and rolling stainless steel; the wide anneal and pickling line recently installed at Lukens' Massillon, Ohio, plant; and another unit used in the refining of stainless steel at Lukens' Coatesville plant.

Bethlehem will melt, cast and process some stainless steel products for Allegheny Teledyne at the Lukens plant in Coatesville.

Bethlehem will buy 150,000 tons of hot-rolled stainless steel annually from the Houston plant to feed Lukens' stainless cold-rolling mills.

Bethlehem said the deal will improve the company's position in carbon and alloy plate. Allegheny Teledyne said the deal will enable it to produce wide stainless steel products.

"I thought the deal was very constructive," said Richard Henderson, a steel industry analyst for Pershing, a division of Donaldson Lufkin Jenrette. "You kind of put a lid on the bidding war and most parties got what they wanted."

But the deal left steel workers at Sparrows Point unhappy. Frank Rose, the president of Local 2610, said the workers in the plate mill participated in a plant-wide agreement to produce $130 million in annual savings in exchange for a new $300 million cold-rolling mill.

Those concessions will result in a loss of about 900 jobs, pushing employment at Sparrows Point down to about 4,500. Closing the plate mill will cut another 400 jobs.

"During the whole time we were negotiating the cold mill, they were negotiating with Lukens," Rose said. "They could have told us something else was in the wind" that might affect Sparrows Point.

Curtis H. Barnette, Bethlehem Steel's chairman and chief executive officer, yesterday said the cold-rolling mill and the closing of the plate mill were separate issues aimed at improving the company's competitiveness.

"We find the challenges of trying to make the right decision each and every day very difficult," he said.

Barnette said it was not clear how many people would have to be laid off to eliminate the 400 jobs. Some workers are likely to retire. Others might find jobs elsewhere at Sparrows Point, he said.

xTC But union leaders said multiple layoffs are a strong possibility. "Corporate-wise, this Lukens deal might be a smart thing," Rose said. "But I'm looking down here at the people who will be affected."

Yesterday Bethlehem shares gained 93.75 cents to close at $9.4375. Allegheny Teledyne closed at $23.8125, up 31.25 cents, while Lukens shares fell $1.75 to $29.5625.

Pub Date: 1/29/98

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