`Armco, AK Steel agree to sale`

Deal endsWheatlandTube bid
* * *

SAWHILL DIVISION’SFUTURE UNCLEAR,SPOKESMEN SAY

By Michael Roknick
Herald Business Editor
Armco Inc. has agreed to be bought by AK Steel Holding Corp. for $842 million, which kills Wheatland Tube Co.’s efforts to buy Armco’s Sawhill Tubular Division based in Sharon.

Sawhill’s Sharon pipe plant and its Wheatland tubing plant employ a total of 620. When counting the company’s Howland Township plant in Trumbull County, Sawhill employs about 800. In a joint news release AK and Armco said they expected to close the deal in the third quarter. Both companies said it was too early to determine how the deal will affect Sawhill.

AK Steel, based in Middletown, Ohio, is a steel producer while Armco also produces steel along with snowplows and other ice control products and pipe and tubes.

“From Armco’s standpoint this is a win-win for both companies,’’ said Jim Herzog, manager of corporate communications. “We create a company much better equipped to meet the challenges ahead.’’

In steel production AK Steel focuses on “value-added’’ carbon steel while Armco is known for its specialty, flat-rolled stainless and electrical steel, Herzog noted.

Armco’s shareholders have been grumbling in recent years as the company’s stock has been flat. Shares have traded as low as $3, sometimes reaching $7 over the past three years, but generally staying in the $4 to $5 range.

But Armco has had a run of 11 consecutive quarters of profits. Its stock price languished because Wall Street saw that the steel industry was in the doldrums and that imports were hurting the industry, Herzog said.

“We managed to do well because of our niche products but we got lumped in with the rest of the steel industry which has been out of favor for some time,’’ he said.

The deal, which is based on AK Steel’s recent trading prices, offers $7.50 a share to Armco shareholders, a sizable boost to Armco’s closing price Thursday of $5.63.

What will happen to Sawhill will be AK Steel’s call after the merger, Herzog said. “On an immediate basis, Sawhill is not for sale,’’ he said.

That sentiment was echoed by AK Steel.

“The specific plans for anything Armco had in motion are most likely on hold for the time being,’’ said Alan H. McCoy, vice president of public affairs for AK Steel. “That’s as far as we can legitimately project.’’

By buying Armco, AK Steel snatches Sawhill away from Wheatland Tube which had been pursuing a deal to buy its competitor for more than a year. Although executives from neither company would talk about the negotiations it was widely believed environmental issues were the sticking points on reaching a final sale agreement.

Wheatland had been negotiating with Armco as late as this week, said Jim Feeney, senior vice president of Wheatland Tube. He said he learned of the deal Friday morning when it was publicly announced. Feeney left no doubt where negotiations now stand.

“Our talks are over,” he said. “We’ll each go our separate ways. AK Steel is a very fine company and if they see a strategic fit for Sawhill it will be good for Sawhill.’’

Due to confidentiality agreements that almost always govern sales negotiations, Feeney said Armco couldn’t disclose to Wheatland Tube that it was having separate talks with AK Steel. He wasn’t concerned that Sawhill will be owned by a large steel producer.

“Over the years we’ve competed against steelmakers that owned pipe and tube plants,’’ Feeney said. “We’ve survived while most of the others haven’t.’’

With the Shenango Valley touting itself as the “Pipe and Tube Capital of the World,’’ figuring out what Sawhill will look like under AK Steel’s ownership is a question that will be on the minds of many. In addition to Sawhill and Wheatland Tube, Sharon Tube Co. is the third-largest local pipe and tube producer.

“I don’t know how this will affect them,’’ said Lee Hooper, president of Sharon Tube. “I think it depends where AK Steel puts Sawhill in their plans of growth or needs when they merge with Armco.’’

Back to TOP // Herald Local news // Local news headlines // Herald Home page

Updated May 21, 9999
Questions/comments: herald@pgh.net
For info about advertising on our site or Web-page creation: advertising@sharon-herald.com