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Bethlehem steels for fight
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January 5, 1998: 12:17 p.m. ET
Tops Allegheny Teledyne offer for Lukens with $30-a-share stock-cash bid
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NEW YORK (CNNfn) - Going tit-for-tat with the nation's largest steel maker, Bethlehem Steel Corp. upped its takeover offer for Lukens Inc. Monday to $30 a share, edging out rival Allegheny Teledyne Inc. in a month-long test of iron wills.
The latest bid-ratcheting comes two weeks after Allegheny Teledyne (ALT) offered to acquire Lukens Inc., a specialty steel maker based in Coatesville, Pa., for $715 million. The move was the takeover equivalent of an end-run around Bethlehem, which had announced a $650 million merger deal with Lukens just a week earlier.
Allegheny offered to pay $28 a share cash and to assume Lukens' (LUC) debt -- a more enticing proposal, on the surface, than Bethlehem's $25-per-share bid.
Lukens officials expressed satisfaction with the Allegheny bid but refrained from signing any deal in order to give Bethlehem (BS) executives a chance to riposte.
Bethlehem's comeback bid Monday -- a cash-stock deal valued at about $740 million -- would spawn a new steel-plate division that Bethlehem executives say will greatly streamline the combined companies' raw steel-making capacity. Bethlehem steel, with annual sales of $4.7 billion, is the second-largest steel company in the United States, after Allegheny Teledyne.
Lukens boasts billion-dollar yearly sales. But to starry-eyed Bethlehem executives, the company is more than the sum of its balance sheet line-items: It brings to the manufacturing fold cachet as the country's only fully-integrated producer of carbon, alloy and stainless steel.
Curtis H. Barnette, Bethlehem's chairman and chief executive officer, said the merger would result in a more globally dynamic company able to deliver a wider range of services at lower cost.
"We continue to believe that this transaction has significant strategic benefits to Bethlehem, and that the combination of the strengths of each company will establish the premier plate business in North America and, perhaps, the world," Barnette said.
The transaction is expected to close early in the second quarter of 1998 and is subject to approval by Lukens shareholders.
Under its terms, Bethlehem will pay 68 percent of the takeover value in cash and the rest in common stock at a rate based on the 15-day average closing price before the signing of the deal. Bethlehem also would assume $250 million of Lukens' debt.
Allegheny Teledyne officials declined to comment Monday on how the company might react to the new developments. "Allegheny Teledyne is considering all its options," said Bill Acton, the company's director of public relations.
Bethlehem executives said the merger would harness the plate-making capabilities of both companies under a single new division, to be called Bethlehem-Lukens Plate Division. "The division's name would allow for continued recognition of the Lukens name, which has a rich history and importance in the marketplace," Barnette said.
The division would consolidate six current plate mills into four, resulting in the eventual closure of the Coatesville 206-inch plate mill and the Sparrows Point 160-inch sheared plate mill.
Lukens currently ships about 750,000 tons of carbon and alloy plate and 260,000 tons of stainless steel products annually from its facilities in Pennsylvania and Ohio. Bethlehem officials said they expect a one-time restructuring charge of about $50 million from the shutdown of the Sparrows Point plant.
After the takeover, Bethlehem anticipates annual sales of nearly $5.5 billion, based on shipments of 10 million tons. Bethlehem currently employs 15,500 workers, while Lukens has 3,400.
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