Steel buyout talks heat upBy Thomas Gnau, Journal
Business Writer, E-mail: email@example.com
The steel industry consolidation dance may be heating up again.
“A potential acquirer” has approached steelmaker Rouge
Industries, according to a Pittsburgh Post-Gazette story Tuesday.
The story said “many analysts believe” the suitor is U.S. Steel
Also Tuesday, Chris Olin, an analyst with Cleveland’s Longbow
Research, told The Journal that he has heard that AK Steel Corp.
representatives have spoken with Ispat Inland Inc. officials.
AK Vice President of Public Affairs Alan McCoy declined to
comment. A spokeswoman for Ispat Inland could not be reached.
Part of Ispat International, East Chicago, Ind.-based Ispat
Inland calls itself the sixth-largest integrated steelmaker in the
After U.S. Steel beat AK in April in an acquisition battle for
bankrupt National Steel, AK Chairman and Chief Executive Richard
Wardrop pledged to look for further acquisition opportunities.
Industry observer and union consultant Michael Locker, publisher
of the Steel Industry Update, said that excluding mini-mills, only
four “legacy-burdened” integrated steelmakers remain: WCI Steel,
Ispat Inland, Rouge — and AK.
Olin added Weirton Steel to that list.
Locker likened mergers to a game of “musical chairs.” Acquirers
negotiate contracts freeing them of some legacy costs — pensions and
retiree health care benefits — while the companies that are left
behind still grapple with those costs.
“The chairs are quickly disappearing,” Locker said.
“In my opinion, AK is no longer a leader in the steel industry,”
McCoy declined to respond to Olin’s remark. He also declined to
say whether AK is talking with Rouge.
U.S. Steel spokesman John Armstrong would not say whether his
company is interested in Rouge.
But he said the domestic steel industry was given three years of
breathing room through tariffs on imported steel to consolidate.
Those tariffs will have been in effect for half of their duration in
September, he said.
“Time is of the essence in getting the consolidations done,”
While U.S. Steel has acquired National, International Steel Group
has acquired LTV Steel and Bethlehem Steel.
With AK’s share price trading just above $3 — the stock closed at
$3.04 Tuesday, down 5 cents — Olin said it was more likely that AK
would be acquired than acquire. Olin mentioned German industrial
conglomerate ThyssenKrupp AG as one possibly interested company, but
he had no definitive information to share.
A spokesman for Dusseldorf, Germany-based ThyssenKrupp could not
But McCoy said that AK’s competitors active in consolidation are
shedding legacy costs only temporarily. They have only “restarted
the clock” on those costs, he said.
He acknowledged that those moves give competitors at least an
temporary advantage over AK “to some degree.”
That’s one reason why AK has invited the union representing its
more than 3,000 Middletown workers, Armco Employees Independent
Federation, to talk about ways AK can remain competitive.
The AEIF has agreed to talk but without reopening its current
collective bargaining agreement for the moment. The contract expires
in February 2006.
The AEIF isn’t the only union to which AK has made overtures. AK
has workers represented by United Steelworkers of America in
Ashland, Ky., and Mansfield, Ohio, United Auto Workers in Rockport,
Ind., and another independent union in Butler, Pa.
“We’re going to have those discussions with all of our plants and
constituents,” McCoy said. He declined to say whether any talks have
U.S. Steel and Rouge have strong ties. U.S. Steel supplied Rouge
with about 92 percent of the coke Rouge bought last year, Armstrong
said. Both own an electrogalvanizing line in a joint venture called
Double Eagle Steel Coating.