Bethlehem board votes to sell assets to ISG

PHILADELPHIA -- Bethlehem Steel's board voted unanimously Saturday to sell its mills to International Steel Group, a deal that could bring the once-mighty industrial giant out of bankruptcy and create the nation's largest steelmaker.

Bethlehem has been reviewing a $1.5 billion offer from Cleveland-based ISG since Jan. 6, and the companies reached an agreement in principle last week after chief executive Robert Miller said he and financial advisers agreed it was "the best value achievable."

The deal will be submitted in one or two weeks to U.S. Bankruptcy Court in New York, Miller said.

"Following the board's affirmative vote this afternoon, Bethlehem will move quickly to finalize the asset purchase agreement with ISG to complete this sale early in the second quarter of this year," Miller said. "This sale will provide a new beginning for our employees and our operations, which will continue without interruption during the change of ownership."

He said the value of the transaction will be recalculated at that point to reflect changes the companies have negotiated, though the $1.5 billion was still "in the ballpark."

Pushing to wrap up the deal by April, Bethlehem Steel caused a stir Friday when it said it was seeking in bankruptcy court to terminate health and life insurance benefits for 95,000 retirees and their dependents on March 31.

'Morally callous' plan

The United Steelworkers of America called the plan "morally callous" and union officials and other retiree representatives said they would try to negotiate a later termination date as they try to get alternate plans in place.

Miller said the end of the bankruptcy process was an appropriate time to end the benefits, which he said would have been terminated whether Bethlehem had sold its assets or been reorganized as a stand-alone company.

"Regrettably, expectations of lifelong benefits were made during an era when health care costs were lower and the company's financial condition was stronger," Miller said. Bethlehem continued to honor that commitment more than a year after filing for bankruptcy, he said.

ISG's Chairman Wilbur Ross said the company's board approved the sale last week. Ross, also chairman of WL Ross & Co. in New York, is a bankruptcy restructuring specialist who has built ISG by acquiring the assets of bankrupt LTV in March and Acme Steel in September.

Adding Bethlehem Steel's plants would make ISG the largest U.S. steelmaker with an annual production capacity of 16 million tons.

On a global scale, the world's largest steel company, Belgian-based Arcelor, produces three times that, but Miller said the consolidation still would make ISG a significant world steelmaking competitor.

The deal would keep Bethlehem Steel's Burns Harbor Division in northwest Indiana, Sparrows Point Division near Baltimore and smaller plants in Lackawanna, N.Y., and Coatesville and Conshohocken, Pa., operating.

The company's rusting mill along the Lehigh River in Bethlehem, 50 miles north of Philadelphia, has been shut down since 1995. Only about 300 administrative employees remain at the company's headquarters. Bethlehem has shrunk to fewer than 12,000 active employees, from a mid-20th century peak of nearly 300,000.

The sale won't go off without giving other bidders a chance, though Miller has unsuccessfully sought buyers around the world since Bethlehem Steel filed for Chapter 11 bankruptcy in October 2001.

Miller and Ross said they don't expect other offers when the Bankruptcy Court schedules a bidding period before it approves the deal.

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On the Net:

Bethlehem Steel: http://www.bethsteel.com

WL Ross & Co.: http://www.wlrossandco.com