The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Reporter Tara Perkins published in the December 23, 2004 edition
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Dec. 23, 2004. 12:43 AM |
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Stelco stalked by a giant |
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By Tara Perkins |
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The world's largest steel company is looking at Stelco. Mittal Steel, a massive force with operations in 14 countries, is interested in at least some of Stelco's operations. It adds another name to the list of suitors circling Hamilton's beleaguered steelmaker. Several announcements of interest in recent days have raised the stakes as the bidders jockey. The Mittal announcement comes one day after Algoma Steel revealed that it is considering buying Stelco. As well , the Ontario Teachers' Pension Plan (OTPP) and Sherritt International came forward Tuesday with a $1.8 billion joint refinancing offer for the steelmaker. The news jolted Stelco's shares more than 10 per cent yesterday morning. All of the interest suggests that Deutsche Bank's $900 million deal with Stelco -- the court-approved minimum bid -- could be topped. "I don't think it would be that hard to beat, given the interest," said one steel analyst. But he cautioned against comparing the bids on their dollar value alone. He believes the joint offer from Sherritt and the OTPP (under the name Island Energy Partnership) would be dependent on government money for Stelco's pension plans. Stelco CEO Courtney Pratt said the Deutsche Bank deal "set a bar that's pretty high", but acknowledged that "it's pretty obvious" the bank's offer can be topped. "We're getting what we hoped for in terms of the level of interest -- very competitive bids," Pratt said. "It is going to be a question of comparing apples, oranges and bananas." Companies that want to beat Deutsche Bank's deal have until Dec. 31 to tell Stelco of their interest, and until the end of January to submit their final offers. As for Mittal, "there's definitely interest. But what has been done and how far we're prepared to go, I can't tell you," said Daniel Robert, vice-president of Ispat Sidbec, a subsidiary of Mittal in Contrecoeur, Que. One of Stelco's subsidiaries, Norambar, is also located in Contrecoeur. Ispat Sidbec will be renamed Mittal Canada next month. Robert would not say what plans Mittal might have for Stelco. "It's confidential," Robert said. "Are we interested in the whole of Stelco? are we interested in parts of Stelco? I'm not at liberty to tell." Officials with the United Steelworkers of America have been in discussions with Mittal for more than a month. The union says it will only support bids that include all of Stelco's operations. Leo Gerard, the Pittsburgh-based president of the USWA, has said the union has "a relationship of mutual respect" with Mittal. In October, Mittal announced it was buying International Steel Group for $4.5 billion US. Once that deal is completed next year, Mittal will be the world's biggest steelmaker with about 165,000 employees, annual shipments of 52 million tons and sales of about $32 billion US per year. It is headed by Indian-born billionaire Lakshmi Mittal. Stelco has about 8,000 employees, ships about 5 million tons and takes in about $2.7 billion in sales each year. "We knew that Mittal would come out one day or another," Bill Ferguson, president of the United Steelworkers' Lake Erie local, said yesterday. Mittal joins steel heavyweights U.S. Steel and Russia's Severstal in the bid for Stelco. Some steel analysts say Algoma, which is smaller than Stelco and just recently emerged from bankruptcy protection, will not be able to compete. But Stelco's board of directors is under no obligation to choose the bid with the highest dollar value. Considerations will include how workers are affected, which bidder can work with the union and how the pension deficit is addressed. Sault Ste. Marie-based Algoma was itself gobbled up by Dofasco in 1988. The steel market crashed, prompting Dofasco to abandon Algoma and write off its entire $705 million investment. That pushed Algoma into bankruptcy protection. The steelmaker was restructured in 1992, under the guidance of Hap Stephen, who is Stelco's chief restructuring officer. A decade later, Algoma plummeted back into protection. This time, again with Stephen's help, it obtained provincial support on its pension obligations and a $50 million loan from the federal government. The steelmaker chopped 350 jobs, but gave the union representation on the board. Over the past 15 years, Algoma's workforce has dropped from about 12,000 to 3,000. At the end of last quarter, Algoma had $243.3 million in cash on hand, up from about $200,000 at the same time in 2003. Soaring steel prices have padded the company's coffers. But analysts say it's only a matter of time before Algoma sparks its own bidding war, raising the possibility that a giant steel company could buy both Stelco and Algoma. Earlier this month, a New York investment firm bought up almost 14 per cent of Algoma's stock, believing the steelmaker is ripe for a takeover. tperkins@thespec.com 905-526-4620 With files from Canadian Press Bidders at a glance: Island Energy Partnership: * Joint venture of the Ontario Teachers Pension Plan Board and miner Sherrit International Corp. * Teachers Plan has assets of $79 billion and invests pension money of 252,000 active and retired teachers in Ontario. Ranks behind Caisse de depot as Canada's largest pension fund. * Sherritt is based in Toronto. Diversified resources company producing coal, nickel, cobalt oil and gas and electricity in Canada and Cuba. Has assets of more than $2.4 billion. * Teachers and Sherritt are already partners in the Luscar thermal coal company in Western Canada and other businesses. Algoma: * Steel producer based in Sault Ste. Marie, Ont. * Algoma is Canada's third-largest integrated steel company, behind Stelco and Dofasco Inc. * It has about 3,000 employees. * At the end of last quarter, Algoma had $243.3 million in cash on hand. Severstal: * Annual steel production: 12.5 million tonnes, about three times Stelco's annual output. * Made $597 million US in 2003 on sales of about $3.2 billion US. Had more than $1.4 billion in cash on hand as of June 30. * Has about 40,000 unionized workers in steelmaking. Severstal Group has 130,000 who work in steel, automotive, raw materials, transport and insurance businesses. * Chairman Alexei Mordashov, 39, is one of the world's richest men Deutsche Bank: * Founded in Berlin in 1870 * The bank has the equivalent of $1,300 billion Cdn in assets with more than 65,000 employees operating in 74 countries. * More than half the bank's staff works outside Germany. * Deutsche Bank became Europe's largest bank in terms of assets after it acquired U.S.-based Bankers Trust Corporation in 1999. U.S. Steel: * Founded in 1901; Based in Pittsburgh, Pa. * Has a worldwide annual steel capability of 26.8 million tons. * U.S. Steel is involved in a number of other businesses, including transportation, real estate, technology licensing and engineering. Mittal Steel: * Is completing a $4.5 billion US acquisition of International Steel Group. * Will become the world's biggest steelmaker when that deal is complete, shipping 52 million tons of steel each year. * Headed up by Lakshmi Mittal, 51, who got his start in his family's steelmaking business in India and has grown to become a regular in British tabloids and lives in a $130-million US mansion in London. His net worth is estimated at $22 billion US. --The Canadian Press and Hamilton Spectator |