U.S. Steel's bid for National Steel is OK'd

Bankruptcy court clears $1.05 billion deal in cash and assumed debt

April 22, 2003|By BLOOMBERG NEWS

CHICAGO - National Steel Corp. won bankruptcy court approval yesterday to sell its assets to U.S. Steel Corp. for $1.05 billion in cash and assumed debt.

U.S. Steel's bid was chosen last week after a two-day auction over a higher offer by AK Steel Holding Corp. Unlike AK Steel, U.S. Steel had already negotiated a collective-bargaining agreement with the Steelworkers union.

The acquisition of National Steel's assets approved by Bankruptcy Judge John H. Squires after a hearing yesterday in Chicago will help U.S. Steel secure its position as the biggest U.S.-based steelmaker. U.S. Steel's top spot had been threatened by the proposed sale of assets of Bethlehem Steel Corp. to International Steel Group Inc.

"Being the biggest gives them a small advantage in terms of pricing power, but where they stand to gain the most is in the cost benefits," said Chris Olin, a metals analyst at Longow Research in Ohio. "Costs and product offerings [are] what really made them look at this acquisition."

Middletown, Ohio-based AK Steel bid $1.125 billion in cash and assumed liabilities, but hadn't reached an agreement with the United Steelworkers of America. Talks between the union and AK Steel were hampered by distrust stemming from a three-year lockout of 600 workers at a plant in Ohio.

The union said its members would strike National Steel if AK Steel won the bidding and a judge voided the current labor contract.

About 150 steelworkers marched in the plaza outside the federal courthouse during yesterday's hearing, chanting "No contracts, no peace," in support of the U.S. Steel bid.

Both bidders agreed to assume about $200 million in National Steel liabilities. Pittsburgh-based U.S. Steel bid $850 million in cash, while AK Steel had offered $925 million in cash.

At the hearing yesterday, lawyers for AK Steel objected to the sale, contending that U.S. Steel had a deal with the union and Mishawaka, Ind.-based National Steel before the auction.

AK Steel attorney Douglas Lipke said the company will consider asking Squires to delay the transaction's completion so the decision can be appealed. Squires said a stay of his order would require AK Steel to post a bond.

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