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Brazilian company to control AmeriSteel

The Japanese owner that forged the financial rebirth of AmeriSteel is selling its majority stake in the Tampa steel producer to a major Brazilian company.

Gerdau S.A. of Rio de Janeiro, Brazil's largest maker of steel used in the construction industry, said Wednesday it has signed a letter of intent to buy 75 percent of AmeriSteel under a deal with Kyoei Steel Ltd. of Osaka, Japan, which has controlled the former Florida Steel since 1992.

Through a holding company that will be controlled by Gerdau, Kyoei Steel indirectly will retain a 10 percent interest in Florida's only steel company. AmeriSteel chief executive Phillip Casey and his management team will keep their 10 percent stake, and a group of minority stockholders will retain its 5 percent.

Terms were not disclosed. But Daniel Baldin, an analyst at Fator Doria Atherino in Sao Paulo, Brazil, said Gerdau told him the takeover was worth between $200-million and $300-million.

Casey downplayed the impact of the ownership switch on his company's 2,100 employees, its management and its customers. "As long as we continue to perform, whoever the shareholder is really isn't relevant," he said. "If we were in trouble, that'd be different."

AmeriSteel executives said the biggest change may be an infusion of capital for their company to add to its network of four minimills and 21 steel processing operations throughout the country.

Gerdau is about four times larger than Kyoei but faces obstacles in expanding further in South America. Its mills account for more than half of Brazil's production of rebar, the steel rods used to reinforce concrete in large-scale construction projects. It also produces half of Brazil's merchant bars, which are used to build transmission towers and other structures.

Gerdau produces about 5-million tons of steel a year with eight mills in Brazil, two in Canada and others in Chile, Uruguay and Argentina.

Crimped by Brazil's recession and high interest rates, Gerdau wants to continue diversifying outside its home country. With the AmeriSteel purchase, about 45 percent of its production will be outside of Brazil, according to Osvaldo Schirmer, Gerdau's chief financial officer.

Expanding in the United States also could make it easier for the company to raise money to invest in Latin America's largest steelmaker, Brazil's Cia. Siderurgica Nacional. Gerdau is in talks to buy an 18 percent stake in CSN and is talking with international banks about a large, long-term loan.

Schirmer said Kyoei approached his company about the AmeriSteel deal, but others said the two companies have bandied the idea about before.

Gerdau "has been looking for a number of years for a beachhead into the U.S. steel business," said Tom Landa, AmeriSteel's chief financial officer. "If you look at our track record, what you have here is a very profitable and successful business. Gerdau certainly recognized that."

AmeriSteel is now the largest fabricator of rebar in the United States and the country's second-largest rebar producer. And it just closed its most profitable quarter in history.

The outlook wasn't always that rosy.

Founded in 1937 as Florida Steel Products, the company faced mounting debt during a recession in the early 1990s. In 1988, management rebuffed a hostile takeover by taking the company private. But by 1992, the leveraged buyout had failed and Kyoei took control.

Five years ago, Kyoei tapped Casey to lead a painful restructuring that hit hard at AmeriSteel's Tampa headquarters. He closed the Tampa mill and its trucking division, displacing nearly 200 area jobs.

Today, the company has just 75 people in its Tampa headquarters, 45 in a fabrication division in Plant City and the rest in 25 locations across the country.

Its balance sheet, however, is the best in years.

In its latest quarter, AmeriSteel had net income of $10.4-million, or 98 cents a diluted share, compared with $6.6-million, or 62 cents a share, a year earlier. Last year's quarterly earnings included a $2.1-million charge.

_ Information from Bloomberg News and Times files was used in this report.