Wise Metal set to buy Ala. plant Reynolds facility in Muscle Shoals now slated to close

'We plan to run it'

Baltimore company projects that sales could nearly double

Expansion

December 30, 1998|By William Patalon III | William Patalon III,SUN STAFF

Baltimore-based Wise Metal Co. Inc., a privately held firm that does metals trading and helps big companies such as General Motors Corp. "hedge" their future metals purchases, is expected to announce plans today to buy a Reynolds Metals Co. alloys plant in Muscle Shoals, Ala.

Wise and Reynolds would not disclose the value of the deal, which both companies say should be completed early next year. Wise, which says it has $1 billion in annual sales, has already paid one-quarter of the purchase price.

The Reynolds Metals plant employs 1,600 mostly union workers and was slated for shutdown as part of a restructuring plan by its Richmond, Va.-based parent company. The large facility has two aluminum-reclamation plants, a plant that makes the coiled aluminum sheeting used for soft-drink cans and a plant that can apply special coatings to the aluminum.

"We plan to run it and try and make it successful," said George Stoe, executive vice president of Wise Metal.

With the acquisition, Stoe said, Wise Metal's annual sales would approach $2 billion. The company now employs about 450 nationwide. Employment had stood at 50 -- and sales at $750 million -- before Wise Metal bought the Reynolds Recycling business in February, Stoe said.

Reynolds Metals is perhaps best-known to consumers as the

maker of Reynolds Wrap aluminum foil. As part of a plan to pare down to four businesses, Reynolds sold its Reynolds Recycling unit to Wise in February. Since that Wise Metal business supplied scrap aluminum to the Muscle Shoals reclamation and production facility, and since shutdown appeared likely because several deals had either fallen through or failed to materialize, Wise Metal decided to buy the plant itself and keep it operating as a captive customer, Stoe said.

Before Wise came on the scene, Reynolds had struck a deal in 1997 to sell the facility to Aluminum Co. of America (Alcoa), but the U.S. Justice Department stopped the sale. Wise Metal's Stoe said Alcoa had actually planned to shut the plant down -- in effect, buying market share and taking productive capacity out of the industry, which could have led to higher prices. The Justice Department felt that would have anti-competitive implications for the industry, Stoe said.

After that, a local Alabama group, Avalon-Borden, reached an agreement in principle to buy the Muscle Shoals facility and that "agreement" remains in place, said Joe Vagi, the firm's corporate communications manager. However, Stoe said it will not affect the Wise Metal deal because Avalon-Borden was unable to fulfill the requirements to make the deal happen.

As a result of its restructuring, which includes cost-cutting and the sale of businesses, Reynolds Metals has gone from about 29,000 workers worldwide to about 19,500, Vagi said.

Reynolds also had earlier sold its can-making operation to Ball Corp., a key customer of its Muscle Shoals plant. Therefore, before Wise Metal would agree to buy the Muscle Shoals plant, Stoe said, Wise made sure that the supply agreement with Ball remained intact.

Before the February acquisition of the recycling business and this latest deal with Reynolds, Wise Metal had traded in scrap metal and helped big companies "hedge" their future metals purchases. Hedging is a way for a company to protect itself against unexpected fluctuations in metals prices by locking in specific price that it is satisfied with. But it requires a great deal of sophistication for the company that arranges the hedging to make money. Stoe said Wise Metal has two employees who are experts at trading and hedging in the metals markets.

Pub Date: 12/30/98

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