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YOUNGSTOWN Local officials upbeat about North Star sale



Published: Wed, May 29, 2002 @ 12:00 a.m.



North Star ranks 11th for income tax withholding among city employers.

By CYNTHIA VINARSKY

VINDICATOR BUSINESS WRITER

YOUNGSTOWN -- City officials and a local development specialist say they're confident a team of foreign-owned companies buying North Star Steel's tube mills in Youngstown and Houston will keep its workers on the job and its plants operating long term.

Cargill Inc., the Minneapolis parent of North Star, announced Tuesday that a group of foreign-owned companies had agreed to pay $380 million in cash for the seamless tube production mill in Youngstown and the tube finishing mill in Houston.

Dave Bozanich, the city's deputy finance director, said Cargill contacted city officials early Tuesday to discuss the potential sale. "They believe that, of all the potential suitors, this group is the best from a community growth standpoint," Bozanich said.

Companies vying

Several companies were vying to buy the tubular division, but the Vallourec & amp; Mannesmann Tubes group submitted the highest bid. City development officials had urged Cargill to choose a buyer that would keep the plant in operation and would retain the jobs there.

Bozanich said Cargill spokesmen announcing the acquisition said they "don't expect any significant change in employment" at the local mill.

James Cowan, plant manager, confirmed that North Star employees have been informed that they may all retain their jobs, if they wish, under the new ownership. Locally, the mill has 430 employees and 140 contract workers on its payroll; the Houston mill employs 130.

City officials had watched the sale process with some concern, Mayor George McKelvey explained, because they are aware that some acquisitions aim to eliminate competition. When that happens, the company bought is closed soon after the sale is complete.

McKelvey said he's confident that won't be the case for North Star.

"This purchase is solely motivated by the desire to produce steel," he said.

"So far, my impression is that the sale adds to the long-term stability of the local plant, and it gives me cause to be optimistic that there may even be some expansion in the future," the mayor added.

Up to date

The mayor said V & amp;M Tubes is "on the cutting edge" of technology in the tube industry. The company wanted to buy North Star's Youngstown plant because it has a skilled workforce and recently completed a $30 million modernization. "They want to produce steel as efficiently as they can."

Reid Dulberger, senior vice president of economic development at the Youngstown-Warren Regional Chamber of Commerce, said he's also optimistic about the planned acquisition.

"It appears to be a good fit," he said of the V & amp;M proposal. "Not too many people in this area realize what an outstanding facility North Star is. It's a world-class operation."

Tax commissioner Dan Brott said the Youngstown mill is one of the city's largest manufacturing companies and ranks 11th among employers contributing to the city tax base. The company withheld $630,000 in employee income tax to the city last year, he said.

Ownership

V & amp;M Tubes, a producer of seamless steel tubes, will own 80 percent of the two tubular mills if the deal goes through.

V & amp;M is based in Houston, but it is a joint venture between Vallourec, a French steel tube producer, and Mannesmannrohen-Werke, a German company.

Sumitomo Corporation of America, a New York tube maker, and Sumitomo Corp., its Japanese parent company, will own 14 percent and 6 percent, respectively.

Another acquisition deal was announced last year when Lone Star Technologies of Dallas offered $430 million for the tubular division, but the deal fell through in December when the buyer lost its financing.

Lone Star made another offer this time, as did Maverick Tube Corp. of St. Louis. Cowan said V & amp;M's bid was the highest, even though it was $50 million less than the earlier offer, and Cargill liked the fact that it was a cash bid and not dependent upon a financing arrangement.

vinarsky@vindy.com




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