Spurned suitor wanted to sell Universal Stainless real estate

Pittsburgh Post-Gazette

One of the reasons Universal Stainless & Alloy Products rejected an unsolicited merger offer is because the proposed suitor’s plan included selling the Bridgeville specialty steelmakers’s real estate and leasing it back.

Correspondence between the company and Synalloy Corp. of Richmond., Va., indicates Universal Stainless also thought the offer was not generous enough and overstated the savings that could be realized by combining the two companies.

The objections were included in letters the two companies have exchanged since June 1. Universal disclosed the correspondence Friday in a filing with the U.S. Securities and Exchange Commission.

Universal disclosed Synalloy’s offer Thursday, saying at that time that it had no merit and that there was no reason for further discussion.

Investors evidently took the company at its word. Universal shares closed Friday at $19.50, down 10 cents, while Synalloy rose 16 cents to $11.31. Shares of target companies typically jump on news of an offer while the suitor’s stock usually declines.

Synalloy president and CEO Craig Bram told Universal in a June 1 letter that its investors would own 51 percent of the combined company. They would also get an estimated $33.8 million, or $4.68 for each Universal share they own, from the sale and leaseback of the company’s property.

The remainder of the $56 million Synalloy anticipated receiving from the real estate transaction would be used to reduce the debt of the combined company, Mr. Bram wrote.

He said Synalloy’s management team would run the combined company.

Universal chairman, president and CEO Dennis Oates responded June 7, writing that the proposal fails “to adequately recognize the true value of the company’s present position.” Selling Universal’s property and leasing it back “is a transaction structure that we find to be unacceptable,” Mr. Oates wrote.

Synalloy has acquired 3 percent of Universal’s stock. The holding company’s businesses include producing welded stainless steel pipe, steel and fiberglass tanks used to store liquids, and chemicals. Synalloy also distributes pipe.

Universal makes specialty steels for the aerospace, power generation, oil and gas, and heavy equipment markets.