Beth Steel investors reset mold

Analysts predict Greenway principals will seek changes

`Corporate agitators'

Kingsley, Duberstein, Carl Icahn disciples, favor major overhauls

Heavy industry

August 20, 1999|By Kristine Henry | Kristine Henry,SUN STAFF

Analysts say it's too soon to know just what Bethlehem Steel Corp.'s new major investors have in store for the company, but one thing appears certain: They won't be passive bystanders.

Alfred Kingsley and Gary Duberstein -- the principals of Greenway Partners LP, which with its affiliates recently acquired 5.6 percent of Bethlehem -- are students of Carl Icahn, the corporate raider who gained notoriety in the 1980s for his hostile takeover of Trans World Airlines.

Duberstein was Icahn's general counsel for eight years. Icahn used to refer to himself and Kingsley, who worked for him for nearly 30 years, as "the Lone Ranger and Tonto."

Kingsley and Duberstein have been called "activist investors" and "corporate agitators" for their habit of staking out huge positions in companies then pushing for management overhauls, mergers or even company name changes.

They have described themselves as "catalysts for enhancing shareholder value."

Greenway "may see some way to create value for the shareholders," said Brian L. Eisenbarth, an analyst at Collins & Co. outside San Francisco. "They may go in and try to get more control and get a merger partner or get rid of unprofitable assets."

In its filing with the Securities and Exchange Commission, which is required when one group acquires more than 5 percent of a company, Greenway praised Bethlehem's management. But Greenway also said it intends "to communicate with members of management and their advisers in the future."

In the filing, Greenway said it acquired the shares because they "are undervalued by the market at the present time under the present circumstances."

Its shares closed yesterday at $8.125 -- near their historical low.

Last month Bethlehem, which has been hit by competition from cheap imports, reported a net loss for the second quarter of $29.7 million, or 31 cents per diluted share, compared with a profit of $37.6 million, or 23 cents a share, for the second period last year. Revenue was $984 million compared with $1.2 billion in the second quarter of 1998.

Greenway believes "that management has done a commendable job," the filing said. They "also believe that further consolidation in the domestic steel industry is desirable and should occur at an accelerated pace."

If Greenway pushes for consolidation -- whether Bethlehem acquires another company or is acquired -- it will likely make its voice heard loud and clear.

Last month's shareholders meeting at Venator Group Inc. is proof of that. About 14 percent of the shares of the operator of the Foot Locker and Champs sporting-goods chains is in Greenway's hands.

Kingsley and Duberstein tried to get themselves and two others on to Venator's board but were rejected. Shareholders also turned down Greenway's aggressive bid to have the company change its name back to Woolworth Corp.

Venator's chairman and chief executive officer called Greenway's maneuvers a "distraction."

The relationship was "a bit adversarial," said Karen Sack, an analyst who covers Venator for S&P Equity Group. "It's hard if you're trying to run a company and you've got shareholders saying they don't like what you're doing."

"I am tending to approach this as good news for Bethlehem Steel, in that Greenway, with its track record, is not going to sit by and do nothing and lose money," said George Kirchwey, a Bethlehem analyst at SAMCO Capital Markets in Dallas.

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