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Bankruptcy Court Approves U.S. Steel Acquisition of National, Purchase Agreement Signed
Apr 22, 2003
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United States Steel Corporation (U.S. Steel) confirmed yesterday that U.S. Bankruptcy Court in Chicago, IL, U.S. has approved its purchase of National Steel Corporation's integrated steel assets. U.S. Steel also announced that it has signed a definitive Asset Purchase Agreement with National, which was approved by the bankruptcy court earlier Monday. "We are extremely pleased that we have emerged as the successful bidder for National's world-class assets," said U. S. Steel Chairman and CEO Thomas J. Usher. "The acquisition of these assets will be a significant step forward in our strategy to grow profitably and to strengthen our position as a leading global provider of high value-added steel products." Under the terms of the agreement, U. S. Steel will purchase substantially all of National's steel-making and steel finishing assets and the assets of National Steel Pellet Company for U.S. $1.05 billion, including $850 million in cash and the assumption of $200 million of National's lease and contractual obligations. The agreement provides that net working capital will be at least $450 million on the closing date. U. S. Steel intends to fund the cash component of the acquisition through a combination of existing cash balances, credit facilities, and the issuance of debt securities. U. S. Steel said it will not assume any liabilities related to National's pension plans, which have been terminated by the Pension Benefit Guaranty Corporation, nor will it assume National's defined benefit retiree medical and life insurance plans and, consistent with the U. S. Bankruptcy Code, the transaction will exclude all liabilities except as have been agreed to by U. S. Steel. The transaction is expected to close later in the second quarter and is subject to customary closing conditions. Based on a preliminary assessment, the company expects annual acquisition synergies of at least $200 million within 2 years of completing the transaction, plus the elimination of costs related to National's pension and retiree medical and life insurance plans, which have not been assumed by U. S. Steel. These savings are expected to result from a number of actions including increased scheduling and operating efficiencies, the elimination of redundant overhead costs, the reduction of freight costs and the effects of the new labor contract as it relates to active employees at the acquired National facilities. Savings related to application of the new labor contract to existing U. S. Steel facilities are in addition to this synergy amount. In total, the transaction is expected to be accretive to U. S. Steel's earnings and cash flow within the first year. In its order approving the sale, the Court found, among other things: that the U. S. Steel offer is the highest and otherwise best offer, that U. S. Steel will acquire the assets free and clear of all mortgages, liens, and charges, that U. S. Steel will provide a greater recovery for National's creditors than would be provided by any other practical available alternative, and that the sale must be approved and consummated promptly in order to preserve the viability of National's business as a going concern. Under the Asset Purchase Agreement with National, U. S. Steel will acquire facilities at National's two integrated steel plants, Great Lakes Steel, in Ecorse and River Rouge, MI., and the Granite City Division in Granite City, IL; the Midwest finishing facility in Portage, IN., near Gary, IN; ProCoil Corporation in Canton, MI; National Steel Pellet Company's iron ore pellet operations in Keewatin, MN, and various other subsidiaries; and joint-venture interests, including National's share of Double G Coatings, L.P. in Jackson, MS.

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