AK Steel Holding Corporation & Armco Inc. Announce Proposed Merger
21 May 1999
AK Steel Holding Corporation & Armco Inc. Announce Proposed Merger Joint News Release
MIDDLETOWN, Ohio, and PITTSBURGH, May 21 -- AK Steel Holding
Corporation and Armco Inc. have entered into a
definitive merger agreement under which Armco will be merged into AK Steel
Corporation, the principal operating subsidiary of the holding corporation.
The proposed merger was jointly announced today by Richard M. Wardrop, Jr.,
chairman and chief executive officer of AK Steel, and James F. Will, chairman,
president and chief executive officer of Armco, following approval of the
transaction by the boards of directors of both companies.
"This merger is the next step in AK Steel's successful strategy of
providing high value-added products for our customers," said Mr. Wardrop.
"Clearly, we see significant operational and organizational synergies that we
believe will benefit our customers and result in an accretive transaction for
AK Steel's shareholders."
"We are pleased that this transaction will provide Armco shareholders a
premium on their investment and the opportunity to be shareholders of the
premier flat-rolled steel company in the U.S.," said Mr. Will. "Our specialty
steel and technology strengths, combined with AK Steel's proven capabilities,
will enable the merged company to compete successfully on a global basis."
The proposed tax-free merger is valued at $7.50 per share to Armco common
shareholders, or approximately $842 million, based on AK Steel Holding's
recent trading prices. Armco's common shares closed on May 20, 1999 at
$5.63. Under the terms of the merger agreement, common shareholders of Armco
will receive .2836 shares of common stock of AK Steel Holding for each common
share of Armco, subject to adjustment. On a diluted basis, there are
approximately 112.3 million Armco common shares outstanding, so that the
exchange ratio would result in the issuance of approximately 32 million shares
of AK Steel Holding common stock.
The exchange ratio is subject to adjustment, within the limits of a
collar, based upon the average closing price of AK Steel Holding common stock
during the ten-day trading period ending six days before the meeting at which
Armco shareholders vote on the transaction. Under the terms of the collar,
Armco common shareholders will receive AK Steel Holding shares having a value
of $7.50 per Armco share so long as the average closing price of AK Steel
Holding common stock during that trading period is between $22.00 and $26.44
per share. If the average closing price of AK Steel Holding common stock
during that period is higher than $26.44, Armco common shareholders will
receive AK Steel Holding shares having a value greater than $7.50 per Armco
share, but in no event more than $8.00 per share. If the average closing
price of AK Steel Holding common stock during the trading period is less than
$22.00, the exchange ratio will nonetheless be fixed at .3409 AK Steel Holding
shares per Armco common share (so that the value received by Armco common
shareholders would be less than $7.50). However, in that event, Armco will
have the right to terminate the merger agreement prior to the meeting of the
Armco shareholders, in which event AK Steel may elect to deliver additional
shares of its common stock in order to assure a value of $7.50 per Armco
common share. Holders of Armco's $3.625 Preferred Stock will receive an equal
amount of a newly issued series of preferred stock of AK Steel Holding
Corporation having the same terms as the $3.625 Preferred Stock. Holders of
each of the other series of Armco's outstanding preferred stock would receive
cash in an amount equal to the redemption price of their shares.
Closing of the transaction is expected in the third quarter of 1999,
subject to customary closing conditions, including expiration of the Hart-
Scott-Rodino waiting period and approval by the shareholders of AK Steel and
Armco. It is intended that the merger, which has a total transaction value
estimated at approximately $1.3 billion, will qualify as a pooling of
interests for accounting purposes. If, for any reason, the merger cannot be
accounted for as a pooling of interests, AK Steel has reserved the right to
pay up to 25% of the amount due Armco common shareholders in cash. In light of
the proposed transaction, AK Steel also announced that it has terminated its
share repurchase program.
AK Steel produces flat-rolled steel products for automotive, appliance,
construction and manufacturing markets. The company employs about 5,800 men
and women in plants and offices in Middletown, Ohio, Ashland, Kentucky, and
Rockport, Indiana. Revenues for AK Steel in 1998 were $2.4 billion on
shipments of 4.6 million tons, with net income of $114.5 million, or $1.93 per
diluted share. The company has led the U.S. steel industry in operating
profitability per ton for the past five consecutive years. The company's
Website address is http://www.aksteel.com.
Armco Inc. is a leading domestic producer of specialty flat-rolled
stainless and electrical steels with primary plants in Butler, Pennsylvania,
and Coshocton, Mansfield and Zanesville, Ohio. Armco also produces snowplows
and other ice control products, and standard pipe and tubular products. Total
Armco employment is about 5,700. Revenues in 1998 for Armco were
$1.7 billion, with income, before an accounting change, of $109.6 million, or
$.81 per diluted share. Armco's Website address is http://www.armco.com.
SAFE HARBOR STATEMENT
This joint news release includes "forward-looking statements" within the
meaning of Section 21E of the Securities and Exchange Act of 1934. In
particular, all statements herein with respect to operational synergies and
anticipated shareholder benefits resulting from the proposed merger of AK
Steel and Armco are forward-looking statements. Although the managements of
AK Steel and Armco, respectively, believe that the expectations reflected in
such forward-looking statements are reasonable, there are no assurances that
those expectations will prove to have been correct.