YOUNGSTOWN North Star Steel officials reveal little on possible sale
The local plant manager said Lone Star would be a good match, but he likes some other prospects, too.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Officials at North Star Steel's Youngstown plant are keeping mum on the possible sale of the seamless tube mill and its sister plant in Houston, but one prospective buyer has already issued stock to raise funds for the acquisition.
Jim Cowan, general manager of the Youngstown plant on Martin Luther King Boulevard, acknowledged that several companies have bid on North Star's Tubular Products Division.
He knows who the prospects are, and Cowan said at least three of them appear to be good matches for North Star, which produces steel pipe used to line oil and gas wells. He could not release the names of the would-be owners, however, or say how soon a sale might be final.
At least one prospective buyer, Lone Star Technologies of Dallas, is already lining up cash to help pay for the mills, in case its offer is accepted.
Lone Star, which failed in an attempt to buy the tubular division for $430 million last year, said in a news release that it issued 3.25 million shares of its common stock to raise money for the acquisition. Lone Star said it had to withdraw its previous offer when its financing fell through.
The Texas company, a producer of steel pipes and tubes for the oil and electric industries, said it expects to raise more than $80 million with its stock offering.
Plans are to use the cash to help pay for the North Star plants, if it is the successful bidder.
Cowan said North Star's parent company, Cargill Inc. of Minneapolis, would likely have kept the sale effort under wraps longer if Lone Star had not made it public. The publicly-held company filed a report with the federal Securities and Exchange Commission last week announcing it was considering a stock issue to help fund the purchase.
Learned of offers
Not wanting North Star employees to learn about the sale process from another source, he said, managers told their employees about the offers early last week. North Star's Youngstown plant employs about 425 and about 140 contract workers at full staff.
The Youngstown mill had to cut production to about half its capacity late last year when oil and gas prices tumbled, resulting in a decline in well drilling and in the demand for its products. Business is improving slowly, Cowan said.
"On a scale of 1 to 10, we got down to a 4, now we're back up to a 5 and close to 6," he said. None of North Star's regular employees have been laid off, despite the drop-off in business, but he said the mill has reduced its contract worker numbers.
Could be a benefit
Steel tariffs recently approved by President Bush to fight off competition from cut-rate foreign imports may help North Star indirectly, Cowan said, even though imports of seamless pipe are not one of the categories protected.
North Star's competitors producing welded pipes must use flat-rolled steel, and the price of that commodity is likely to increase because flat-rolled is protected by the tariffs.
If welded-pipe makers increase their prices to offset their higher material costs, Cowan explained, they could narrow the gap between their product and the higher-priced seamless pipe North Star makes. That small price difference could help North Star sell more pipe, in some cases.
"We're not jumping up and down about [the tariffs]," he said, "But they could help some."