The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by reporter Naomi Powell, published in the August 28, 2007 edition
Takeover will earn Stelco boss $67 million
The Hamilton Spectator
(Aug 28, 2007)
Stelco CEO Rodney Mott stands to earn nearly
$67 million under a takeover deal with U.S. Steel set to close this fall.
It will be the second windfall in less than
three years for the steel industry veteran. Mott took home about $100 million
in proceeds from the 2005 sale of International Steel Group, the U.S.-based
firm he revived and then sold to steel giant Mittal Steel.
Stelco's three main shareholders will also
benefit from the sale, which will see Pittsburgh-based U.S. Steel swallow the
Hamilton steelmaker for $38.50 per share.
"The potential synergies are
significant," said U.S. Steel CEO John P. Surma, who met with The
Spectator's editorial board yesterday. "For U.S. Steel, this is a very
strategic transaction."
Mott, 55, took the reins at Stelco during
one of the most difficult periods in its 97-year history. When he arrived in
2006, Hamilton's storied steelmaker had just emerged from two years of restructuring
that became one of the longest and most complicated in Canadian history.
Mott set about restructuring Stelco's
operations and reducing the workforce from more than 5,000 workers to 3,600
through buyout and retirement incentives.
He also immediately bought one million
Stelco shares at $5.50 each, for a total investment of $5.5 million. He will
cash those shares in November for a personal profit of $33 million.
Mott also holds 1,044,000 options to buys
shares at the same price of $5.50 each. Those options, when exercised, will
provide another $34.45 million in profits to the turnaround man. That's on top
of Mott's regular salary and bonuses totalling more than $500,000.
Deal highlights
* U.S. Steel will pay $38.50 Cdn per Stelco
share, or about $1.1 billion total in U.S. dollars. * The company will assume
$1.4 billion in pension and health-care liabilities and $760 million in debt. *
It will also make a voluntary pension contribution of approximately $31 million
US to Stelco's pension fund when the deal closes and guarantee pension funding
obligations under an agreement with the province of Ontario. * Anyone wishing
to top U.S. Steel's bid would have to pay a break fee of $20 million to $30
million US. * No plans to reduce Stelco's workforce or close major operations.
* U.S. Steel will endow a chair in the department of materials science and
engineering at McMaster.
Stelco's three primary shareholders will
also take home hefty returns. Canada's Tricap Management, the restructuring arm
of Brookfield Asset Management, is poised to receive a profit of $323.14
million for its 9.8 million shares. With 4.95 million shares each, investment
funds Appaloosa Management and Sunrise Partners (now called Westface Capital)
will each pocket $163.4 million.
"These people made 600 to 700 per cent
returns on a 17-month investment," said Rolf Gerstenberger, president of
Local 1005 of the United Steelworkers representing Hamilton Steel employees.
"It's outrageous."
One other union official disagreed. Though
their payout was large, he said, Mott and the investors nevertheless made
Stelco into something attractive to a buyer.
"The point is Stelco is in good hands.
They're guaranteeing the pension, accepting the collective agreements and
investing in Hamilton. Many other people in the American markets make money
destroying companies."
Mott declined to comment on his earnings
yesterday. He says he'll return to his home near Charleston, S.C., to consider
retirement once the sale closes.
npowell@thespec.com
905-526-4620