Armco to buy Cyclops for $156 million in cash, stock


The on-again, off-again merger of two major Baltimore stainless-steel makers is on again.

Seven months after a similar agreement fell apart, Armco Inc. announced yesterday that it would purchase Cyclops Industries Inc. for $156 million in cash and stock.

Although the steel industry is suffering from overcapacity, and mergers often result in consolidations and plant closures, local Steelworkers union officials said yesterday that the merger would probably have no impact on the 1,400 steel workers at the two companies' Baltimore facilities.

Armco, based in Parsipanny, N.J., owns a stainless steel rod and wire plant on East Biddle Street. Cyclops owns a stainless steel plate plant on Rolling Mill Road.

Armco, the nation's fifth-largest steelmaker, said yesterday that it wanted to buy its Pittsburgh-based competitor in order to strengthen its specialty steelmaking operations.

In a joint statement, the two companies said the $22-per-share deal will create a large, well-diversified steel company better able to compete when voluntary import restrictions on steel are lifted next spring.

"The fact that this transaction will make us world-competitive is key to our future," said Armco Chairman Robert L. Purdum.

Lee Bland, an Armco spokesman, said his company was very excited about taking over Cyclops' Eastern Stainless Steel plant on Rolling Mill Road in East Baltimore.

The plant, which employs about 600 workers, is the nation's foremost producer of thick stainless plates used for battleships and industrial vats.

But Mr. Bland said the merger will have no effect on Armco's plans to sell its money-losing stainless steel rod and wire plant, called the Baltimore Specialty Steels Corp.

At least one company is considering buying the 800-worker BSSC plant on East Biddle Street, Mr. Bland said. And Armco is trying to interest the United Steel Workers union in an employee purchase of the plant, he said.

Last Feb. 26, a $22-a-share all-cash proposal to merge Armco and Cyclops fell apart when the group that was supposed to fund the purchase reportedly backed out.

While analysts agreed that the two companies complemented each other, Armco's offer on Jan. 16 surprised investors because the company was offering $9.75 per share more for Cyclops than the stock was trading for.

Yesterday's offer of $11 in cash and $11 worth of Armco stock for each of the 7.1 million shares of outstanding Cyclops shares was worth $4.875 more than Cyclops stock was selling for before the announcement.

If the purchase wins approval from the government and stockholders, Cyclops Chief Executive Officer James F. Will will become president and chief operating officer of Armco.

Armco lost $68.1 million on sales of $799 million in the first six months of this year. And Cyclops lost $8.8 million on sales of $531.2 million in the same period.

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