YOUNGSTOWN Purchase of North Star's plants falls through

North Star's parent company is suing the company that was unable to buy the local plant.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- A deal to sell North Star Steel's plants in Youngstown and Houston to a Texas company has fallen through after the company was unable to secure financing.
The current owner, Cargill Inc. of Minneapolis, said plant operations will continue as they have been as it goes to court over the deal. Cargill has filed a lawsuit against Lone Star Technologies that seeks unspecified damages.
Financing: Rhys Best, Lone Star president and chief executive, said his company met its obligations under the contract. He said completion of the deal depended on Lone Star receiving financing.
He attributed Lone Star's financing problems to the Sept. 11 terrorist attacks, which disrupted financial markets and worsened a slowing economy.
Cargill said previously that Lone Star was to pay $10 million if it didn't complete the deal in order to compensate Cargill for taking the plants off the market.
Greg Lauser, a Cargill spokesman, would not comment on details of the breakup Monday.
The companies announced in August that Lone Star would pay $430 million in cash and stock to Cargill to acquire the plants.
Jim Cowan, North Star's plant manager in Youngstown, said last week that Lone Star might be having trouble with its financing because of a downturn in the oil and gas drilling industry.
The oil and gas industry was doing well when the deal was announced. Retail prices of both were high, and new wells were being drilled. Dropping prices have led to fewer wells being drilled now, however.
Lone Star's stock, which traded as high as $34 in the past year, fell to about $11 in early September and recently has been trading at about $16.
Production: Cowan said last week that the Youngstown mill is producing at about half of its capacity because of lower demand. It has retained its 425 employees but has cut back on its 140 contract workers.
Cargill said it wants to sell its tubular division as part of an effort to get out of the steel business and concentrate on its primary industries -- agriculture feed and food processing.
Lone Star is based in Dallas and produces steel pipes and tubes for well drilling and other industries.
North Star's tubular division makes seamless pipe used to line the shafts of oil wells, especially those used for deep underwater drilling.
shilling@vindy.com