Qualitech Gets Courted

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Qualitech Steel SBQ, LLC (Pittsboro, Indiana) will have to wait at least another week to learn its fate, as Steel Dynamics Incorporated (Nasdaq:STLD) (Fort Wayne, Indiana) and Nucor Corporation (NYSE:NUE) (Charlotte, North Carolina) battle it out in an unfriendly duel in the courts over ownership of the Pittsboro steel mill. This is the latest episode in a steel industry trend that has steel firms attempting to increase market share by acquiring shutdown and bankrupt steel mills at relatively inexpensive prices (See related article "Companies see Opportunity in Closed Steel Mills").

Nucor had announced in late June that it would buy the shuttered special bar quality (SBQ) mill for $37 million. However, Nucor failed to meet a July 15 deadline for its exclusivity period, and Steel Dynamics (SDI) tendered an offer of $45 million. Nucor appealed. In early August, a judge delayed SDI's purchase, but at another hearing August 19, SDI was given the go-ahead for the purchase. Nucor has chosen to appeal that ruling, too, and that hearing will occur next week.

Qualitech had seen its share of troubles almost from its beginning. The mill opened in 1999, but ceased operations in February, 2001, and was forced into receivership the following July.

SDI hasn't announced a management team for the former Qualitech mill as yet, but according to President and CEO Keith Busse, they are proceeding with plans to invest $60-$70 million in the mill to enable it to produce merchant and reinforcing bar.

Nucor had pinned its hopes on using the mill to expand into the SBQ market. This would have been Nucor's third major take-over this year, if the deal had gone through. Earlier this year, Nucor purchased Trico Steel Company, LLC (Charlotte, North Carolina), a flat-rolled sheet minimill, for $116.7 million. It also purchased Birmingham Steel, among whose assets are five bar mills, for $615 million, making Nucor the largest steel producer in the U.S. Not satisfied with this, Nucor's Dan DiMicco seems to be set on appealing the court's ruling on the Qualitech issue to the bitter end.