Posted on Fri, Jan. 28, 2005
Financier Wilbur Ross diversifies interests in distressed firms
M.R. KROPKO
Associated Press
CLEVELAND - Just when it appeared that Wilbur L. Ross had turned into a steel magnate, he began diversifying into cloth and coal.
In about three years, the New York financier pieced together the nation's largest maker of steel from raw materials by buying struggling U.S. companies including Bethlehem Steel and Weirton Steel. By the time he unexpectedly decided to merge International Steel Group Inc. into another steel empire late last year, Ross had already delved into textiles and energy, also with the intent of turning distressed firms into profit-makers.
Ross is known for investing in companies in troubled industries and turning them around with fewer workers and without costly obligations like retirees' benefits.
"He's a very tough guy, and he's not a very sentimental guy," said Roland Stephen, a faculty member and international trade specialist at the Institute for Emerging Issues at North Carolina State University. "He finds opportunities in wreckage others have overlooked, and there is a role for that in the free market societies. He picks it up, patches it up and sells."
Ross has invested in industries where problems including declining prices and growing foreign competition helped drive companies into bankruptcies.
His New-York based investment firm, WL Ross & Co. LLC, bought bankrupt clothing maker Burlington Industries, based in Greensboro, N.C., in 2003. Last spring, he added Greensboro-based denim-maker Cone Mills Corp., then put both under the umbrella of the newly formed International Textile Group.
Since 2003 he also became part of a partnership that brought Morgantown, W.Va.-based Anker Coal Group and Ashland, Ky.-based coal company Horizon Natural Resources Co. out of bankruptcy, forming International Coal Group.
Ross said his newest ventures might not follow the ISG formula of buy cheap, fix and sell. But, as he did with ISG, he's thinking about ultimately taking his acquisitions public.
"Our general plans for these companies are to build them up, and to consolidate more things into them," he said.
Ross intends to make Burlington the low-cost producer of products such as men's suits, blue jeans and decorative fabrics in the United States and Mexico. He also has committed $30 million to using nanotechnology, the science of the very small, to stay competitive with manufacturers trying to finding ways to make clothing more wrinkle and stain resistant.
So how does he go from steel to textiles?
"They have a couple commonalities," Ross said in telephone interviews from his office in Palm Beach, Fla. "They are industries people have written off as dead, and they're undergoing a lot of change. And are very much affected by world trade."
Both are big and basic industries.
"We believe in steel that consolidation not only is inevitable but also very desirable and we think the same thing is true in textiles," he said.
That Ross has taken on textiles and coal recently should come as no surprise, said Rodney Mott, ISG president and chief executive officer.
"That's the nature of his investment business," Mott said. "He's a very astute investor, very sharp at looking at changes in the business climate and then making proper investments."
Ross, 67, spent more than 20 years as a bankruptcy specialist at the investment firm Rothschild Inc. before establishing a private equity firm in 2000. He formed ISG two years later, at first with the remains of bankrupt and dormant Cleveland-based LTV Steel. ISG's fast-paced acquisitions into last year included Bethlehem, Weirton, Acme Steel and Georgetown Steel.
Then last October, the company, based in suburban Richfield, announced plans to merge into the international empire of Netherlands steel tycoon Lakshmi N. Mittal for $4.5 billion in cash and stock. The deal, expected to be completed around the end of March, would create the world's largest steelmaker, Mittal Steel, with 70 million tons of steel production capacity and 165,000 employees.
ISG assured its 12,000 employees in eight states that the merger could mean more stable employment prospects. And Ross said he's staying connected to steel, through $2.25 billion worth of stock in the merged company, a board seat and as an adviser.
Meanwhile, ITG, like many other U.S. textile firms, is looking toward China and its growing textile and apparel industries for opportunities. Hong Kong-based China Ting Group, which makes and sells textile products, has entered into a license agreement with International Textile Group to open stores in China to sell fabrics for windows, beds and furniture.
ITG will invest $20 million into what company officials describe as a joint ownership deal.
And Ross is looking to build his coal holdings. He said the plan is to target smaller operators in Appalachia and the Illinois basin, which includes Illinois and Indiana.
"They can't afford the most modern mining equipment," he said. "Those fellows quite often do not have good environmental practices. So we believe we can acquire them and then bring to bear the proper amount of capital and environmental activity."
Ross wouldn't let on about what industry he might take on next.
"There's always something," he said.
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