updated: 10/25/2006 1:15:38 PM
Wheeling-Pittsburgh Corp. and Brazil's Companhia Siderurgica Nacional (CSN) say they will combine their North American assets into a new company, which includes CSN's steel processing facility in Terre Haute.
As part of the deal, CSN will pay $225 million in cash for capital improvements that will include adding a second galvanizing line to its Terre Haute facility.
Upon completion, the existing Wheeling-Pittsburgh Corp. as well as CSN's Terre Haute operations, will become wholly owned subsidiaries of a new holding company, which intends to seek a North American stock exchange listing.
Source: Inside INdiana Business
WHEELING, W.Va. and SAO PAOLO, Brazil, Oct. 25 -- Wheeling-Pittsburgh Corporation (Nasdaq: WPSC) and Companhia Siderurgica Nacional (NYSE: SID) today announced that they have entered into a definitive agreement in which Wheeling-Pittsburgh will acquire the North American assets of CSN, creating a strong, well-capitalized steel producer with a more flexible cost structure, broader value-added product offering, access to CSN's product and process technology, and significant long-term earnings potential. The definitive agreement reflects the strategic arrangement announced on August 3, 2006.
James G. Bradley, Chairman and Chief Executive Officer of Wheeling- Pittsburgh stated, "This agreement marks a new beginning for steelmaking at Wheeling-Pittsburgh and in the Ohio and Monongahela valleys. We are confident that the agreement positions Wheeling-Pittsburgh to deliver sustainable earnings as well as solid future cash flows. CSN is a world-class, fully integrated steel producer with impressive margins and an enviable cash flow, and we look forward to partnering with them as we take Wheeling-Pittsburgh to the next level."
Under the terms of the agreement, CSN will contribute its modern steel processing facility in Terre Haute, Indiana with current annual pickled and oiled, cold rolled and galvanized products of 1 million tons, provide Wheeling-Pittsburgh exclusive U.S. and Canadian distribution rights for CSN's flat-rolled steel products and commit to a ten-year slab supply agreement, which will provide a long-term, guaranteed supply of high-quality slabs on favorable payment terms.
CSN will also contribute $225 million in cash through the issuance by the combined company of a convertible debt security that, with the consent of the United Steelworkers, can be converted into equity in three years. Of the $225 million, approximately $150 million will be used for transformative capital improvements -- $75 million to build a new energy-efficient furnace that would increase Wheeling-Pittsburgh's hot strip mill capacity to 4 million tons, and the balance to add a second galvanizing line at Terre Haute. The remaining $75 million will be used to enhance the combined company's liquidity position.
Marcos Lutz, Managing Director for Infrastructure and Energy, CSN, said, "This transaction will combine CSN's modern North American assets, capital, slab supply and management expertise with Wheeling-Pittsburgh's production capabilities to benefit all of our North American stakeholders -- shareholders, employees, customers and the communities of which we are a part. Together, we will create an integrated, value-added production chain that will result in a more flexible cost structure, broader value-added product offerings and significant incremental earnings potential."
This agreement marks the culmination of an extensive process by Wheeling- Pittsburgh involving a number of potential suitors, as well as the United Steelworkers. In accordance with an agreement reached in September between the Company and the USW, the USW had until October 15, 2006 to submit a bid or assign its right to a designee. No such bid or designation has been made by the USW.
Upon completion, the existing Wheeling-Pittsburgh Corporation as well as CSN's operating subsidiary in Terre Haute will become wholly owned subsidiaries of a new holding company, which intends to seek a North American stock exchange listing. A new Board of Directors will be created, which will include Mr. Bradley as Chairman, two USW directors, five independent directors, and three directors designated by CSN. Wheeling-Pittsburgh's current shareholders will receive 50.5% of the combined company. The remaining 49.5% will be held by CSN, which may increase its ownership to 64% upon conversion of the $225 million debt.
Bradley concluded, "Our Board has demonstrated its open-mindedness in creating value for our shareholders and has repeatedly shown its commitment to evaluating all strategic options, including remaining independent. The Board has concluded that the combination with CSN represents a compelling opportunity at this time. We will continue to engage in a productive dialogue with our shareholders and welcome further input as we work constructively through the merger process."
The Company and CSN expect to file a preliminary proxy statement and prospectus regarding the CSN transaction with the SEC as soon as possible.
The Company's Annual Meeting of Shareholders to elect its Board of Directors is scheduled for November 17, 2006 at the White Palace in Wheeling, WV. In addition, the Company expects to hold a Special Meeting of Stockholders in January 2007 to vote on the proposed transaction with CSN.
In addition, effective October 25, 2006, the Company has terminated its "poison pill" provision that was adopted in February 2005.
Wheeling-Pittsburgh Corporation, together with the other participants as indicated below, intends to file with the Securities and Exchange Commission (the "SEC") a proxy statement and accompanying proxy card to be used to solicit votes for the election of its slate of director nominees at the 2006 annual meeting of stockholders of Wheeling-Pittsburgh Corporation and subsequently at a special meeting of stockholders to seek approval of the Company's proposed strategic alliance with CSN. The Company urges its shareholders to read the proxy statement in its entirety when it becomes available because it will contain important information, including information on the participants and their interests in Wheeling-Pittsburgh Corporation. When filed, the proxy statement will be available at no charge at the SEC's website at http://www.sec.gov. The participants in this proxy solicitation are Wheeling-Pittsburgh Corporation and the director nominees included in the proxy statement to be filed with the SEC. Additional information regarding potential participants in the proxy solicitation and their respective interests may be obtained by reading the proxy statement regarding the proposed strategic alliance if and when it becomes available.
Source: Wheeling-Pittsburgh Corp.