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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
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[ ] Definitive Proxy Statement
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BIRMINGHAM STEEL CORPORATION
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(Name of Registrant as Specified In Its Charter)
THE UNITED COMPANY SHAREHOLDER GROUP
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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THE UNITED COMPANY SHAREHOLDER GROUP
1005 GLENWAY AVENUE
BRISTOL, VIRGINIA 24201
November 26, 1999
Karin Estes
Steven Sears
Institutional Shareholder Services
1455 Research Boulevard
Rockville, Maryland
We have received your analysis and recommendation in relation to the
Birmingham Steel Corporation ("BIR") proxy contest and request that you
reevaluate your decision to support incumbent management. We believe Bob Garvey
has misled you regarding our plans for BIR. It is not our intention to retain
the money losing SBQ operations at all costs indefinitely. WE WILL SELL THE SBQ
OPERATIONS IF IT IS IN THE BEST INTEREST OF SHAREHOLDERS. We urge you not to be
confused by Bob Garvey's desperate attempt to paint this proxy contest as a
battle over the future of the SBQ operations.
We began this proxy contest in July because of the continuing poor
performance of BIR under Mr. Garvey. The issue of this proxy contest has always
been about poor management. In fact, the announcement to sell the SBQ assets was
made almost a month after we declared our intentions to replace Bob Garvey. This
proxy fight is about leadership and management skills, not the future of the SBQ
assets.
When we filed our Schedule 13D in July announcing our intentions, we
relied on statements made by Mr. Garvey and current management in March and
April that the SBQ operations were no longer a problem and that Memphis start-up
costs were completed. The United Group was also not aware at the time of its 13D
filing that BIR had already defaulted on its $300 million revolving credit
agreement.
Mr. Garvey continues to blame the financial problems of BIR and the SBQ
operations on prior management. The fact is the SBQ operations were profitable
when they were acquired in 1993 and contributed substantial profits to BIR until
after Mr. Garvey became CEO of BIR.
BIR entered the SBQ business in November 1993 with the acquisition of
American Steel & Wire ("AS&W"). With the acquisition of AS&W, BIR obtained the
Cleveland facility. At the time of the acquisition, AS&W was the largest
producer of high quality rod and wire products in North America, had the highest
quality product rating in America, and had a recognized quality assurance
program and an outstanding sales and marketing force. The acquisition of AS&W
was immediately accretive to BIR's earnings, producing profits in the third and
fourth quarters of fiscal year 1994, $13.7 million in fiscal year 1995, and
profits in the first three quarters of fiscal year 1996.
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Less than nine months after Mr. Garvey's arrival, the founders of AS&W,
who held executive positions with BIR, resigned and the quality, sales and
marketing forces were decimated by losses of other key personnel. In the fourth
quarter of 1996, under Mr. Garvey's leadership, the SBQ business reported its
first operating loss and has lost money ever since.
MR. GARVEY BEGAN HIS TENURE WITH A PROFITABLE SBQ BUSINESS POISED TO
BECOME A SIGNIFICANT LEADER IN THE SBQ MARKET. The market for product produced
at the Cleveland bar mill is approximately 4 million tons. Under Mr. Garvey's
tenure, the SBQ operations have turned into a debacle.
- - 14 Consecutive Quarters of Losses, including $21 million in the first
quarter of 2000.
- - Twenty-five months of start-up costs at the Memphis facility.
- - Failure to complete the caster upgrade of run out tables and stainless
piping included in the original scope of work at the Memphis facility.
- - Significant turnover of personnel at the Memphis and Cleveland
facilities.
The simple truth is, like numerous other problems at BIR, the problems with the
SBQ business are a result of Mr. Garvey's mismanagement. Other examples include:
- - $15 million loss from a total write-off of BIR's investment in Laclede
Steel Company; written-off less than a year after BIR's initial
investment.
- - $30 million loss from loans and capital invested in Pacific Coast
Recycling; written-off less than three years after BIR's initial
investment.
- - Cartersville rolling mill originally budgeted at $70 million. To date
more than $165 million has been invested in this project and it is
still losing money.
We urge you not to lose focus of the reason for this proxy contest B
poor management. We have slated Mr. John D. Correnti to become Chief Executive
Officer of BIR. The United Group believes Mr. Correnti is the preeminent steel
mini-mill operator in the world, having served as Chief Executive Officer of
Nucor Corporation from January 1996 to June 1999 and President and Chief
Operating Officer from 1991 to 1996. While Mr. Correnti served in an executive
capacity, Nucor's revenues increased from approximately $1.5 billion in 1991 to
$4.1 billion in 1998. Earnings increased during the same period to nearly $300
million from approximately $75 million, and stockholders' equity to over $2.0
billion from approximately $1.1 billion. Nucor is recognized as the premiere
steel mini-mill company in the world and is the second largest steel producer in
the USA. In 1998, Mr. Correnti was recognized by New Steel magazine as its Steel
Maker of the Year.
We urge you to reconsider your recommendation. We believe you have been
misled as to our intentions for the SBQ operations. Simply put, we will sell the
SBQ operations if that is in the
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best interest of shareholders. We have never contemplated retaining the SBQ
operations indefinitely at any cost. Please focus on the real crux of this proxy
contest B the poor performance of BIR under the leadership of Mr. Garvey.
We appreciate your consideration and look forward to hearing from you.
The United Company Shareholder Group
