Northwest Industries OKs $1.4-Billion Merger Offer

CHICAGO — Northwest Industries agreed Wednesday to merge with a division of a privately held Chicago-based corporation in a $1.4-billion transaction that will see Northwest’s Lone Star Steel subsidiary spun off into a separate, publicly held corporation.

Northwest said the merger would follow a tender offer to be made by Farley Metals, a division of Farley Industries, which is a privately held metals- and industrial-equipment manufacturer.

Farley has agreed to pay $50 a share for up to 15.8 million shares, which would be 79% of the outstanding stock. Northwest said a minimum of 11 million shares are required to complete the transaction.

In addition, stockholders would receive one share of newly created stock in Lone Star. The tender offer is to begin May 1, Northwest said.

Terms of Transaction

In the subsequent merger, stockholders would receive shares of a new series of exchangeable preferred stock in the new company and the remainder of the common stock of Lone Star.

Northwest said its board of directors had recommended that its shareholders accept the tender offer. The entire transaction should be completed by Labor Day, Northwest said.

Northwest agreed in principle in February to spin off Lone Star after the collapse of a leveraged buy-out attempt put together by Donald P. Kelly and Roger T. Briggs, two former executives of Esmark Inc. who formed an investment concern to buy Northwest.

Northwest will make a “capital contribution” of $100 million to Lone Star so that the new corporation will be debt-free, spokesman Joe Shenton said.

Northwest asked that trading in its stock be halted Wednesday morning pending the announcement of the plan. Trading later resumed, and Northwest closed on the New York Stock Exchange at $55.875 a share, up $1.

Makes Consumer Products

Northwest, which reported income of $77.5 million in 1984 on sales of $1.4 billion, makes consumer products, such as Fruit of the Loom underwear and Acme Boots, other consumer products, automobile batteries, chemicals and electrical products.

Farley declined to disclose its annual income but said sales are about $700 million a year. Farley Metals has divisions in Toledo, Ohio; Statesville, N.C.; Fremont, Neb., and Chicago. Farley Industries also owns Condec Corp., which makes industrial products, including defense equipment.