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SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BIRMINGHAM STEEL CORPORATION
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(Name of Registrant as specified in its charter)
----------------
(Name of person(s) filing proxy statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transactions:
(5) Total fee paid.
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
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[BIRMINGHAM STEEL CORPORATION]
[LOGO OF BIRMINGHAM STEEL CORPORATION LETTERHEAD] October 29, 1999
Dear Fellow Stockholder:
Birmingham Steel is currently under attack by a small group of dissident
stockholders who, with less than 8% of the Company's stock, want to take
complete control of your Company, without paying you a change of control
premium. This dissident group includes James Todd, former Chairman and CEO of
Birmingham Steel, and John Correnti, formerly of Nucor Corporation and the
dissident group's hand-picked choice to become your Company's new CEO. The
dissident group wants to take over your Company by electing its nominees to
your Company's Board. Before you vote on this critically important matter, we
urge you to take a hard look at Todd and Correnti and at their records at
Birmingham Steel and Nucor, respectively--and then ask yourself whether Todd
and Correnti can bring any real value to Birmingham Steel or to your investment
in its stock.
CAN YOU AFFORD JAMES TODD?
In what has become an increasingly desperate attempt to take over your
Company, the dissident group has launched a personal and no-holds-barred attack
seeking to blame your current Board of Directors and management for the
challenges Birmingham Steel has faced over the past three years. Indeed, the
dissidents recently sent you a letter that was littered with half-truths and
falsehoods about the actions and intentions of your Board of Directors,
including a contemptible allegation of "blackmail" that is completely
unfounded. What the dissident group has not told you--and hopes you will not
find out--is that former CEO Todd and his senior management team were
themselves primarily responsible for your Company's problems--problems that
your current Board and management have spent the past three years addressing.
In fact, James Todd's tenure as Birmingham Steel's Chairman and CEO (October
1991 to January 1996) was marked by bad decisions, bad execution and bad
performance. Here are the facts about Birmingham Steel's performance under
Todd's questionable "leadership":
Fact #1: Massive Increase in Debt Caused by Todd. It was operational
decisions and financial commitments made by the Todd management
team--particularly decisions and commitments related to the SBQ
division--that saddled your Company with a mountain of debt,
damaged its earnings and greatly reduced its operational and
financial flexibility. The dissident group's repeated attempts to
blame the current Board of Directors and management for the
Company's operational and financial challenges and the resulting
impact on stockholder value is inappropriate, unfair and obviously
self-serving.
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Fact #2: Stock Price Plunge Under Todd. During the last two years of Todd's
tenure, Birmingham Steel's stock price plunged nearly 50%, from a
high of $32.63 on March 18, 1994 to $16.38 on January 4, 1996,
Todd's last day as CEO. Again, the dissidents' suggestion that the
erosion of stockholder value began under the current Board and
management is not correct.
Fact #3: Inferior Performance of Core Operations Under Todd. The
performance of the Company's core operations has shown substantial
improvement since Todd left the Company, despite the worst
industry conditions in over forty years.
As outlined in the proxy materials previously mailed to you by Birmingham
Steel, Todd's tenure as Chairman and CEO of the Company was marked by a series
of errors of omission and commission, lack of business analysis, and ill-
thought-out actions that led directly to many of the problems your Company has
faced over the past three years. In light of this unimpressive record,
Birmingham Steel and its stockholders cannot afford to let James Todd return to
a position of power and influence at Birmingham Steel.
WHO IS JOHN CORRENTI?
Until what appears to have been his forced resignation a few months ago,
John Correnti was President and CEO of Nucor. He and two other dissident group
nominees also sit on the Board of Directors of Harnischfeger Industries, a
company that recently filed for bankruptcy.
The dissident group's entire campaign is based on the presumption that
Birmingham Steel needs "saving" and that John Correnti is the perfect savior.
They ask you to believe that Correnti is the preeminent operator of steel mini-
mills in the world and that he possesses remarkable managerial skills. The fact
is, neither of these assertions is correct.
What is true is that Correnti was such a failure at Nucor that the Nucor
Board, we believe, finally forced him to resign. Here is what Nucor Chairman H.
David Aycock was quoted as saying when Correnti was forced out of Nucor:*
"The [Nucor] Board said things have to change. We could not have a
company that was drifting ... There was no effort to develop a strategic
plan to carry the company forward to the next century ... There [have] been
no significant innovation and developments in the company since the very
early 1990's." (Charleston Post and Courier, June 5, 1999)
* * *
"The earnings [at Nucor] have been declining. And the return on assets
has been in decline for some time. Part of that was management style."
(Business Journal of Charlotte, June 19, 1999)
* * *
"[Nucor has] had impulsive management for so long, but we're at a
different plateau now." (Business Week, June 21, 1999)
If John Correnti's operational and management skills were not good enough
for Nucor, how can the dissident group possibly think they are good enough for
you and Birmingham Steel?
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* Permission to use the quotations cited in this letter was neither sought
nor obtained.
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NUCOR STOCKHOLDERS PAID DEARLY FOR JOHN CORRENTI--WHY SHOULD YOU?
Poor performance and poor management style do not come without a price. When
Correnti became Nucor's CEO on January 2, 1996, Nucor's stock was trading at
$56.75. When Correnti left Nucor on June 4, 1999, Nucor's stock was trading at
$46.44, a decrease of approximately 18%. During the same period of time, the
S&P 500 Index was increasing by approximately 114% and the Dow Jones Industrial
Average was increasing by approximately 109%.
And Correnti--in addition to the operational and management problems that
culminated in his departure from Nucor--would come to Birmingham Steel with a
very high price tag. This is what the dissident group already has agreed to
have your Company pay Correnti if they take control of your Board:
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<S> <C>
Annual Base Salary............................................... $ 600,000
Estimated Annual Bonus in Year 2000**............................ 1,080,000
1,000,000 Below-Market Stock Options***.......................... 1,625,000
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$ 3,305,000
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THE FUTURE OF BIRMINGHAM STEEL UNDER
THE CURRENT BOARD AND MANAGEMENT LOOKS BRIGHT
The good news for Birmingham Steel and the value of your investment is that
the future looks bright for your Company. Under the leadership of your
Company's highly experienced and dedicated Board of Directors--which includes
eight independent directors, five of whom have served as CEO of ASARCO, Eaton,
LTV, Texaco and Union Carbide--and an equally experienced and dedicated
management team, Birmingham Steel has made significant progress in fixing the
problems of the past. While much remains to be done, we believe that our
recently announced strategic restructuring--which we expect to complete by no
later than May 2000--is a major step forward in positioning the Company for
increased operational and financial success and increased stockholder value both
near and long term. This restructuring program--which the dissident group
opposes--will allow Birmingham Steel to focus on our strong and profitable core
mini-mill and scrap operations, reduce debt and minimize any future impact of
the SBQ division.
Moreover, we are already beginning to see the positive effect of the
restructuring. Recently, Birmingham Steel announced net income for its first
fiscal quarter ended September 30, 1999 of $5.8 million or $0.19 per share.
Excluding start-up expenses at the Cartersville plant, net income for the
quarter was $8.4 million or $0.28 per share.
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The fate of Birmingham Steel and the value of your investment are in your
hands. You can vote for an experienced and dedicated incumbent Board and
management team or turn control over to a group that includes Todd, Correnti
and their slate of Board nominees, seven of whom have no steel industry
experience. You can vote for an incumbent Board and
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** Bonus is equal, per Correnti's contract with the dissident group, to 1%
of estimated earnings from core operations before interest, taxes, depreciation
and amortization. Calculation excludes earnings from assets held for sale.
*** Calculated on the basis of current market value of shares of Birmingham
Steel common stock ($6.50 per share on October 27, 1999), less the exercise
price of the options ($4.875 per share).
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management that have developed a well-thought-out strategic restructuring
program that includes the sale of the SBQ division--or for a dissident group
that wants to keep SBQ indefinitely and keep pouring untold millions of your
money into it.
IN SHORT, THE CHOICE IS YOURS. YOU CAN REJECT THE TODD-CORRENTI DISSIDENT
GROUP AND THEIR NOMINEES BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE
PROXY CARD TODAY. WE URGE YOU NOT TO SIGN ANY BLUE PROXY CARD SENT TO YOU BY
THE DISSIDENT GROUP.
We thank you for your thoughtful attention to these important issues, and
for your continued confidence and support.
Sincerely,
/s/ Robert A. Garvey
------------------------------------
ROBERT A. GARVEY
Chairman and Chief Executive Officer
IMPORTANT
VOTE FOR A BOARD OF DIRECTORS THAT IS COMMITTED TO BUILDING THE VALUE OF
BIRMINGHAM STEEL FOR ALL STOCKHOLDERS!
WE STRONGLY URGE YOU TO VOTE FOR THE COMPANY'S BOARD OF DIRECTORS BY SIGNING,
DATING AND RETURNING THE ENCLOSED WHITE PROXY CARD TODAY!
If you have any questions or need assistance in voting your shares, please
call:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Call Toll-Free: (888) 750-5834
Banks and Brokers call collect (212) 750-5833
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SETTING THE RECORD STRAIGHT
In their letters and press releases, the dissident group calling itself The
United Company Shareholder Group makes numerous assertions and allegations that
we believe are misrepresentations of fact. It is clear to us that, in their
desperation to take control of the Company, the dissidents have been more than
willing to play fast and loose with reality. For the benefit of our
stockholders, we offer the following examples of the dissident group's
assertions and the corresponding facts as we know and understand them.
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United Group Assertions Birmingham Steel Facts
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1. Birmingham Steel might not receive an Birmingham Steel received an
unqualified opinion from its auditors unqualified opinion from its auditors
2. Birmingham Steel has only $235 million Birmingham Steel has $250 million of
of availability under its revolving availability today, which will
credit facility through December 31, increase incrementally to $300
1999 million, effective January 1, 2000
3. Birmingham Steel has "sub-standard" Birmingham Steel's core mini-mills and
management scrap operations are strong and
profitable, despite some of the worst
industry conditions in many years
Performance of the core operations
under current management is
demonstrably better than under Todd's
management
Birmingham Steel's prior losses are
primarily attributable to the SBQ
division, were caused by misguided
strategic and operational decisions
made by the Todd management team and
should now be a thing of the past as
the strategic restructuring is
implemented and completed
4. John Correnti is the world's premiere The Board of Nucor--a mini-mill
mini-mill operator operation--decided that Correnti was
not right for the job of running Nucor
Nucor's equity did not grow--it
shrank--while Correnti was CEO at
Nucor
Correnti has little experience with
SBQ products and, to our knowledge, no
experience operating a leveraged
company
5. The United Group has a "plan" for Hiring unidentified management and
Birmingham Steel consultants and hoping they will find
a way to make SBQ work is not a plan
"Fixing" SBQ is the wrong plan;
the Company does not have the
financial resources to continue
to fund the SBQ operations
indefinitely
6. SBQ division is easily "fixable" for Significant capital--perhaps as
no more than $15 million much as $100 million--would be
needed to make the SBQ division
operationally competitive
The issue at the SBQ division is
resource availability, not
managerial expertise
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United Group Assertions Birmingham Steel Facts
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7. Continuing to retain and operate SBQ is Continuing to operate the SBQ
a no-risk proposition division would seriously
jeopardize the Company's
financial health
8. Defaults under financing agreements Costs attributable to the SBQ
have caused Birmingham Steel's problems division are responsible for
Birmingham Steel's high debt
levels and the terms of its
financing arrangements
9. Birmingham Steel's current Board is Todd was the sponsor of the SBQ
responsible for SBQ acquisition
Six of Birmingham's nine current
directors were not directors when
the acquisition of SBQ was
approved
10. Decision to invest in American Iron Detailed letter of intent for AIR
Reduction (AIR) joint venture was made joint venture was signed by Todd
by current management in August 1995--prior to current
management's joining Birmingham
Steel. Also, financing
arrangements were put in place by
CFO appointed by Todd--not
current CFO
11. Birmingham Steel has misled Defects in caster were not known,
shareholders about the Memphis or knowable, until production
operations levels reached the 50,000 ton per
month operating rate earlier this
year
12 Birmingham Steel has over-spent for Cost for Cartersville
Cartersville significantly below "greenfield"
cost of new mill
Dissident group's comments
demonstrate their lack of
understanding of Cartersville's
importance to Birmingham Steel's
future
13. Birmingham Steel is "blackmailing" Lenders normally require change
shareholders with change of control of control provisions and, as the
provisions dissidents know, the lenders
refused Birmingham Steel's
request to delete these
provisions from the Company's
financing agreements
14. Bob Garvey has no interest in As the beneficial owner of
Birmingham Steel post-retirement 264,782 shares of Birmingham
Steel stock, Bob Garvey has, and
will continue to have, a
significant personal stake in
Birmingham Steel's future
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