Sydney Steel Sold

Rail Associates, a consortium led by U.S.-based S&K Steel, has agreed to purchase the Sydney Steel Corp., Economic Development Minister Gordon Balser announced today.

"The province is out of the steel business," said the minister. "Taxpayers will no longer fund the operation of a steel mill in Nova Scotia. It is in private hands to be run as a business."

Rail Associates consists of S&K Steel, the Reserve Group, Titanium Company of Canada, Corus Consulting Ltd. (formerly Hoogovens Technical Services Inc.), Holland Company, Palmer Holdings Ltd., Amerifund International Finance Group, and William Powers.

"The taxpayers of Nova Scotia don't belong in the steel- making business," said Premier John Hamm. "We are getting out of the business, and have put an end to the burden on taxpayers."

Earlier this year the premier made a commitment to Nova Scotians, that Sysco would be sold or closed.

The consortium has agreed to purchase the steel plant for $30 million Canadian, including $1.5 million up front prior to the closing date of the sale.

"This sale is in the best interests of the workers of Sysco and the taxpayers of Nova Scotia," said Mr. Balser. "It saves Nova Scotians from the high costs of a closure. It ends continued taxpayer funding, and it keeps workers working, which is good news for their families and for the local economy."

Following a transition period the new owners will finalize the sale by April 15, 2000. During that time the company must work out details of the takeover, including negotiating a new contract with the union.

An additional payment of $2.25 million is due the province at the time of closing, followed by annual payments of $1.5 million per year for 10 years, ending with a balloon payment of $11.25 million in the last year.

Sysco's existing board will play a key role in the transition to new ownership.

Rail Associates will assume management of Sysco immediately. They plan to employ Corus Consulting as the management team at Sysco. As part of their five year business plan, they will pursue new orders and undertake a new marketing strategy.

The province retains responsibility for the steelworkers' pension fund and environmental liabilities. The province has not committed to any new funding or special incentives as part of the deal.

"They will be treated like every other private company operating in the province," said Mr. Balser. "The workers deserve to be treated with fairness and respect. We will sit down with the union and work to fulfill our commitment to them and their families."

ABN Amro, a Dutch investment bank, was hired in April 1999 to conduct a search for a buyer for Sydney Steel.

The company approached more than 100 firms worldwide. Detailed packages were sent to eight parties in September 1999 after qualifying based on the bank's assessment of their financial and management resources as well as their steel-making ability.

Sysco became a Crown Corporation on December 19, 1967. In its 30-year history it has cost taxpayers approximately $3 billion. Efforts to sell the Crown Corporation have been under way since 1992.