Saturday, December 15, 2001
The prospective buyer has until midnight today to finalize the deal.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Employees at North Star Steel's seamless pipe mill here were still waiting Friday to learn who will be signing their paychecks next year as the deadline for an acquisition deal loomed.
Lone Star Technologies, a Texas producer of steel pipes and tubes for the oil and electric industries, has until midnight today to consummate its $430 million purchase of North Star's Tubular Steel Division. The division includes the North Star pipe mill on Martin Luther King Boulevard and a mill in Houston.
Cargill Inc., North Star's Minneapolis-based parent company, wanted to sell the tubular division as part of an effort to get out of the steel business and concentrate on its primary businesses: agriculture feed and food processing.
Financing difficulty: Jim Cowan, general manager of North Star's pipe mills here and in Houston, said Lone Star officials were still trying to put together financing for the purchase late Friday.
It might be hard to convince a lender that the project is worthwhile, Cowan explained, with the steel industry struggling and the gas and oil well drilling industry also suffering a downturn.
North Star's tubular division makes seamless pipe used to line the shafts of oil wells, especially those used for deep underwater drilling, so its performance generally shadows the gas and oil industry, not the steel industry. Still, he theorized, steel's problems probably complicate the negotiations further.
Oil and gas were doing well when the Lone Star acquisition was announced in August, Cowan said, and financing did not appear to be a roadblock. "If you would have told me in August that Lone Star might have a problem getting the financing it needed for this deal, I would have said you were nuts," he said.
Stocks fall: But energy stocks were among those that plummeted after Sept. 11 -- Lone Star's shares, which have traded as high as $34.30 in the past 12 months, tumbled to $11 in early September and have been trading in the $16 range this week.
Low gas and oil prices have had a negative effect on North Star Tubular, as well.
Cowan said the Youngstown mill has seen its orders drop steadily since August and is producing at 50 percent of its capacity now because of reduced demand.
He said the mill hasn't laid off its regular employees, but it has cut its contract staff by about two-thirds. The facility has about 425 employees and, at full staff, also provides employment for about 140 contract workers, such as inspectors.
Lone Star would forfeit an escrow deposit of about $10 million if it can't consummate the acquisition.
Cowan said North Star employees were generally pleased about the prospect of a Lone Star acquisition because the pipe mills would add to the Houston company's product mix. Lone Star had also said it would keep North Star's management and employees.
"If I could say one thing, I'd say that the patience this work force has shown has been unbelievable. Nobody has panicked," Cowan said. "They would just like it to be done."
vinarsky@vindy.com