The new owner has deep pockets -- it's paying cash for the North Star division and has a large research budget.
By DON SHILLING
and CYNTHIA VINARSKY
VINDICATOR BUSINESS STAFF
YOUNGSTOWN -- Three companies with foreign roots are buying North Star Steel's Youngstown and Houston mills, but officials say the local pipe mill's 430 employees will retain their jobs.
Cargill Inc. of Minneapolis said it has signed an agreement to sell the mills for $380 million.
Leading the buying group is Vallourec & amp; Mannesmann Tubes, a producer of seamless steel tubes which is known as V & amp;M Tubes.
This Houston-based company is a joint venture between Vallourec, a French steel tube producer, and Mannesmannrohren-Werke, a German company. It would own about 80 percent of North Star's tubular division if the deal is completed.
Sumitomo Corporation of America would own 14 percent and Sumitomo Corp. would own 6 percent. Sumitomo Corporation of America is a New York-based tube maker, but is a wholly owned subsidiary of Sumitomo Corp., based in Japan.
James Cowan, general manager of the Youngstown operation, said V & amp;M is considered the world technology leader in the manufacture of seamless tube. "The employees right now are taking it as a positive," he said. "It's a very strong company, a world player, and it's very strong financially."
He said the new owners will pay cash for the North Star division, unlike other potential buyers such as Lone Star Technologies of Dallas and Maverick Tube Corp. of St. Louis, which would have had to borrow to buy the plants.
The new owner's bid was only slightly higher than those of others vying for North Star, he said, but the fact that it is in cash and not reliant upon a financing deal was also pleasing to Cargill. Cargill is interested in raising cash to expand and improve its agriculture feed and food processing businesses.
V & amp;M also has a healthy budget for research and development, which helps it to keep its technology lead in the industry -- under Cargill, North Star had a very small budget for research, Cowan said.
Meetings to begin
Cowan said officials representing the new owners were to begin meeting with North Star managers here today. It was too early today to say how employees' new salary and benefit packages will compare with what they're receiving now.
"Everybody here is going to still have a job, including me," he said, adding that he doesn't expect employees to see a significant difference in their wages and benefits.
He expects to see 15 to 20 new employees added at North Star's administrative offices here, working in the human resources, information technology and accounting departments.
Under Cargill, about two-thirds of the administrative work is handled at the parent company's headquarters in Minneapolis, but most of that work will be done locally under the new ownership, he said. There are no plans to expand the production work force.
The current offer is $50 million less than the $430 million offer that Cargill accepted when the tubular division was up for sale last year. That offer from Lone Star Technologies of Dallas was dropped, however, when Lone Star's financing fell through.
With about 430 employees and 140 contract workers, the Youngstown plant can produce about 550,000 tons of seamless pipe a year. About two-thirds of the pipe made by the plant is used for casings for oil and gas wells in deep seas.
The Houston plant employs 130. It is a finishing plant that heat-treats, threads and performs coupling operations on pipe made in Youngstown.
North Star is the second largest of the U.S. mini-mills, which produce steel from scrap, and the country's seventh largest steelmaker overall.
Besides its tubular division, North Star has eight other plants that are not part of this deal.
With the acquisition of North Star, Cowan said, V & amp;M will be tied with Tenaris Tube of Venezuela as the two largest seamless tube makers in the world.