Big Steel Buys Again

In their paneled board room on the 13th floor of Los Angeles’ Pacific Finance Building, the directors of California’s Consolidated Steel Corp. gathered last week. After they had settled themselves in their cushioned leather chairs, President Alden Gallup Roach brought up routine business; a 25¢ common dividend was declared.

As the last order of business, Alden Roach made a quiet announcement: Columbia Steel Co., West Coast subsidiary of giant U.S. Steel, had offered to buy Consolidated and its subsidiaries for $8,293,379 in cash. Pleased grins spread over the directors’ faces. Quickly they voted to accept the offer. (Next day, Consolidated stock, worthless a decade ago, jumped from $19 to $27 on the Los Angeles exchange, the following day climbed another five points.) If the deal did not surprise the directors, who had known that Roach was dickering, it did surprise the West Coast.

Turnabout. What not only surprised but shocked Californians about the deal was that Alden Roach had long preached that the prime need of West Coast industry was cheap steel. To get it, Roach had often implied that the West’s dependency on Eastern steel had to be ended. But now Big Steel, which already controls 39% of West Coast steelmaking capacity, was to be fattened up on Alden Roach’s own baby, the biggest independent fabricator west of the Rockies.

How come? The obvious answer was that Big Steel’s offer was too good to resist. Stockholders would cash in on Consolidated’s lush wartime operations, not have to risk peacetime competition. Big Steel would get a thriving company (with a $35 million backlog) and a fabricator for the vast production of its Geneva plant. Steelmen gossiped that Big Steel, impressed by the way Roach had pulled Consolidated off the rocks, intended to get him too. But Roach was mum about that.

Without Roach, the future of independent steelmen in the West looked dim. The only remaining major Western independent was Henry Kaiser, who cried that Consolidated’s sale “could very easily have the effect of eliminating other small producers and myself.” But many another industrialist hoped that the increase in Big Steel’s fabricating facilities could permit Geneva to produce at capacity (1,300,000 tons a year), ultimately help bring down the price of Western steel.

The $91 million South Chicago plant, second in size to Geneva among Government-owned steel plants built in wartime, was sold by the War Assets Administration last week to Republic Steel Corp. Republic, which had run the plant during the war, paid $35 million. Of this, only $5 million was in cash. The rest will be paid in installments, $1.5 million a year for 20 years.