Wilbur L. Ross, who heads up New York distressed situation specialist WL Ross & Co. llc, once said, “Troubled companies don’t usually just get better magically, you have to fix them.”
The failing U.S. steel industry has been in trouble for decades, and now Ross has turned his attention to it by buying the integrated steel assets of America’s third largest steel manufacturer, LTV Corp., which filed for bankruptcy protection for the second time in late December last year. The transaction was worth $325 million, which has been described as a “steal” for Ross.
The acquisition includes LTV’s integrated steel-production facilities in Cleveland, East Chicago, Ind., Hennepin, Ill., and Warren, Ohio, all of which produce flat rolled steel for use in a variety of industrial processes and which Ross plans to reopen.
Ross said in a statement he is hopeful that the mills “can be profitable and globally competitive,” after President Bush announced 30% tariffs on steel imports. Ross could not be reached for further comment.
The transaction awaits approval by the U.S. Bankruptcy Court. It involves $125 million in equity and $200 million in assumptions of environmental and other liabilities, according to a press release. The contract also requires LTV to pay $4 million to WL Ross & Co. if LTV accepts another bid.
If the deal is approved, Ross said he plans to appoint Randy Mott as president and chief executive officer of the newly formed company. Mott formerly held executive positions with Nucor Steel and U.S. Steel.
Steel supply outweighs demand globally today by 200 million tons, and steel prices are at 20-year lows. Chris Olin, a Midwest Research analyst has said therefore that from an industry perspective, Ross’s move makes no sense. But, said Olin, he’s getting the assets for nothing.
Ross founded WL Ross & Co. in April 2000, and has offices in New York, Tokyo and Seoul. Among its LPs are The State of Wisconsin Investment Board, CalPERS, GE Capital, and TransAmerica Corp., and the firm has quickly become one of Asia’s largest foreign investors. Ross also launched the Absolute Recovery Hedge Fund recently.