By KEVIN NEVERS

Bethlehem Steel Corporation and International Steel Group have at last finalized an asset purchase agreement under which ISG will acquire substantially all of the bankrupt company’s assets.

The APA was signed late Wednesday, and though not strictly speaking a formality—a number of unspecified details remained to be negotiated after Bethlehem’s Board of Directors voted Feb. 8 to accept an agreement in principle—the signing comes as no surprise.

At a teleconference today Bethlehem Chair and CEO Robert “Steve” Miller Jr. said that the APA will “shortly” be filed with the U.S. Bankruptcy Court in the Southern District of New York. In its own statement today ISG said that it expects the court to approve the transaction at a hearing scheduled for April 22.

Although at some point the court will open an auction and entertain competing bids, no one at the moment is anticipating any other competing entity to outbid ISG, which is offering approximately $1.5 billion in cash and assumed liabilities. Miller was unable, however, to pinpoint the value of the deal. “It’s just about impossible,” he said, “to take a very complicated transaction and boil it down to a single number. . . . If you quote a billion and a half, you’ll be close enough.”

Under the terms of the APA, ISG will acquire all of Bethlehem’s steelmaking assets: principally Burns Harbor Division and the Sparrows Point, Md., Division; but also Lukens’ former plate-making operations in Coatesville and Consohocken, Pa.; and Pennsylvania Steel Technologies, a rail-maker in Steelton, Pa.

But ISG will also acquire a grab-bag of other operating assets: Bethlehem’s assets in Hibbing Taconite Mining Company in Hibbing, Minn.; steel finishing plants in Indiana, Ohio, and New York; and joint ventures in Indiana, Illinois, Mississippi, and Florida.

In addition it will acquire virtually all of Bethlehem’s non-operating—and definitely non-core—assets: Bethlehem Works, a 163-acre mixed use redevelopment project in Bethlehem, Pa.; Bethlehem Commerce Center, a 1,600-acre industrial park also located in Bethlehem; the Martin Tower, the 21-story office building where Bethlehem’s corporate headquarters are located; and around 2,000 acres of surplus property in Lackawanna, NY, the site of an integrated mill which Bethlehem closed in 1983, and in the greater Johnstown, Pa., area, 700 acres of which were part of the company’s now defunct bar, rod, and wire division, the other 300 associated with Bethlehem’s Cambria coal mine.

“We are eager to welcome the Bethlehem employees and their outstanding facilities to the ISG family,” ISG President and CEO Rodney Mott said, “and we look forward to serving our nation’s premier manufacturing companies with excellent quality steel under the most efficient conditions in the industry.”

ISG did not say what exactly it intends to do with Burns Harbor Division, but Miller speculated today that he would expect to see even more specialization for the “automotive market” at Burns Harbor Division, as ISG moves to eliminate duplications there and at its operation at Indiana Harbor.

Meanwhile, ISG said that it has reached an agreement with the United Steelworkers of America on the principles of a basic labor agreement based on the contract recently ratified by ISG employees at the former LTV operations, and that negotiations should be “concluded in the near future.”

ISG has set aside around $100 million to make transition-assistance payments to Bethlehem’s USWA members who opt to retire. Miller would not comment today on how many positions ISG will eliminate, although in February he projected between 3,000 and 4,000. ISG put the figure at the time at around 2,000 corporate-wide, the majority which, it has said—more than 1,000—will be voluntary separations achieved through the transition-assistance program.

Upon closure of the deal, probably in the early second quarter, ISG would become the nation’s largest integrated steelmaker with a ship capability of 16 million tons annually.

Posted 3/13/2003