TRW
After holding off a hostile takeover attempt by Northrop Grumman by convincing shareholders they were getting a raw deal with Northrop’s low- to mid-$50 per share offer, TRW CEO Philip Odeen secured top dollar for the Lyndhurst-based aerospace, automotive and defense contractor — $60 per share and $7.8 billion, plus assumption of TRW’s debt. Odeen even successfully navigated through a short bidding frenzy that included British defense contractor BAE Systems Plc and which led Northrop to increase its offer several times before meeting Odeen’s price.
But TRW’s sell-off began prior to Northrop’s unsolicited offer, when Odeen began to break up the aerospace giant. First, Odeen sold off TRW’s aeronautical systems business to BFGoodrich for $1.5 billion. Then, he separated its automotive business, and in August sold its NovaSensor division to GE Industrial Systems.
In December, the U.S. Justice Department signed off on Northrop’s acquisition. The same day, TRW announced plans to donate its Lyndhurst headquarters to the Cleveland Clinic Foundation, effectively closing the doors on its long history of corporate philanthropy in Northeast Ohio. As a legacy of TRW’s presence, in fall 2003, a shopping plaza will open on property it parceled off in its first phase of dismemberment a few years ago.
International Steel Group
It’s hard to believe that it’s been a little over a year since the final death toll rang out for LTV Steel. It has also been less than a year since New York-based W.L. Ross swooped in and either “saved” or “stole” — depending on who you talk to — the assets of the former LTV Steel to start the International Steel Group (ISG). The dichotomy is a result of the love/hate relationship Cleveland has with steel production. People often asked, “What did having LTV in Cleveland really mean to the city?”
Was it something to brag about — being one of the remaining steel producing towns — or has it kept Cleveland from looking ahead to new industries?
And that brings up the question of whether the ISG solution is good enough.
Yes, W.L. Ross paid $262 million for a bankrupt LTV, but many argue it was well below the value of the sum of its parts, leaving pensioners, suppliers and other debt-holders out in the cold. Yes, 2,800 workers have their jobs back, but that is about a quarter of the number LTV used to employ.
What is certain is that ISG has made a bad situation better in terms of getting rid of legacy costs. The debt and high labor costs that former management complained about are not a problem for the new company.
In fact, it is doing so well, it’s also acquired the bankrupt Acme Metals for $65 million and is in negotiations with Bethlehem Steel, which is also in Chapter 11.
ISG produces 25 percent less using 48 percent few workers and 60 percent fewer managers and the company expects an operating profit of $90 million, in part because of the rising cost of domestic steel. However, the market is expected to get worse before it gets better, the Bethlehem buyout may cost the company more than it expected, and there are always China, Russia and Japan to worry about.
But for now and for better or for worse, there is steel being made in Cleveland.
Ohio Business Machines
Ohio Business Machine’s (OBM) years of bleeding money culminated in a Chapter 11 bankruptcy filing in June. At the time, OBM Chief Executive Officer Sal Spagnola said the company would reorganize and get out from under its heavy debt load. It never did.
Minolta Corp. and its subsidiary, Minolta Business Solutions (MBS), acquired the office copier supplier’s remaining assets in October per a Federal Bankruptcy Court ruling. The $3.8-billion Japan-based conglomerate hired the former employees of OBM and acquired the company’s assets. Minolta also reported it will continue to operate out of OBM’s offices and use the same phone numbers.
“It is our intention, with your continued support and the assistance of these former OBM employees, to restore OBM to its former lofty position as soon as possible,” branch general manager Gregory R. Pasco writes in an open letter on the OBM Web site.
This kind of takeover was the best thing that could have happened to OBM.
Minolta has the money to get the company back on its feet and market it successfully. With competitors like Meritech, Meritech Blue, Lake Business Products and others, Minolta will have to continue to fight for market share.
It will be interesting to see if it dominates, or cuts its losses and leaves town.
NCS Healthcare Inc.
If you put a musical score to the recent saga involving Beachwood-based, nearly-bankrupted NCS Healthcare Inc. and the jealous lovers Omnicare Inc. and Genesis Health Ventures, it might make for an interesting opera. NCS is the tragic figure, the once-successful long-term care and pharmaceutical service provider which lost its fortune when new accounting standards and out-of-control costs caused the company to sustain a net loss of $3.3 million in the quarter ending September 2002.
When Genesis came courting and offered to merge with NCS and pay $1.75 a share, it seemed like a match made in heaven.
But waiting in the wings was Omnicare, ready to do battle with Genesis, although at the time, NCS’ board of directors was leery about its new suitor’s intentions.
As in any good epic, a war ensued. This one was played out on the modern battlefield, a court of law. Before the battle was over, Genesis and Omnicare went before the court to determine which company had the right to buy NCS.
In the end, NCS shareholders got their prince when the court ruled the company was allowed to break the original agreement with Genesis and consider the more lucrative one from Omnicare. Genesis went home broken-hearted, NCS’ stock went up and Omnicare raised its offer to $130 million ($5.50 a share).
And, of course, Cleveland says goodbye to yet another company headquarters in the area. Close curtain.
