Ispat-Sidbec : Entering North America


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The Acquisition Contd...

Sidbec was the only DRI plant of its kind in Canada. The DRI was fed, along with scrap and pig iron, into two eccentric bottom tapping (EBT) arc furnaces that converted the metallic charge into liquid steel. Two continuous-casting machines solidified the liquid steel into steel slabs and billets. A 60-inch hot-strip Steckel mill rolled the cast slabs into hot-rolled strip. Two 52-inch cold-reversing mills then rolled the hot-rolled strip to thinner cold-rolled strip. The cast billets were rolled in the rod and bar mills.

Sidbec could vary DRI production and usage depending on production requirements in the melt shop and changes in the price and availability of scrap. When scrap prices were low, it did not make sense to produce DRI. DRI was required only when the plant was producing the highest-quality steel. Otherwise Sidbec used locally available scrap.

Business Strategy Case Studies | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies

Business Strategy Case Studies | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies

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Sidbec-Dosco's subsidiaries and joint ventures manufactured a wide variety of steel products: Sidbec-Feruni (Ispat) Inc and Deitcher Brothers (1992) Inc reclaimed scrap, Sorevco and Company, Ltd, galvanized sheet, Walker Wire (Ispat) Inc and Acufil, Ltd Partnership made wire products, and Delta Tube and Company, Ltd, produced ERW pipe. The situation in Sidbec was different from that in Trinidad and Mexico. Sidbec was producing near capacity. And although the company had reported huge losses in 1991 and 1992 and a smaller loss in 1993, it reported a net profit of C$11.9 million in the last full quarter leading up to the sale to Ispat in 1994. Moreover, Sidbec’s management had already taken many of the difficult decisions required to set Sidbec on a profitable path before the sale to Ispat. During the market downturn in the early 1990s, Sidbec slashed employment from 3,600 to 2,400, restructured operations, and cut costs.

"We had a difficult period in [1992-93], the two years prior to the privatization. We were tight for cash, and the government didn’t know what to do with the company. So we were living in a state of flux. Every morning I would spend an hour with the finance people discussing who we will pay today. On that basis, one could say that privatization came in at the right time.”

- John Leboutillier, President of Sidbec-Dosc o since 1986.

Taking note of Ispat’s success at turning Imexsa (Mexico) and Carribean Ispat Limited (CIL), the Quebec government finally chose Ispat over other bidders to buy Sidbec-Dosco. The sale was finalized on Aug. 17, 1994. Ispat renamed the company Sidbec-Dosco (Ispat) Inc. Ispat paid C$71 million for the company, which included C$26 million as a reimbursement for profits earned in the first half of 1994. It injected an additional C$30 million in equity into the company, assumed outstanding debt and liabilities of C$280 million, and agreed to make C$100 million of capital upgrades over five years. In August 1994, Ispat acquired the capital stock of Sidbec-Dosco Inc. from the Government of Qu?ec. As part of the acquisition, Ispat Sidbec committed $73 million towards capital expenditure over a period of five years.

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