667 Madison Avenue
Niagara Corporation was, in the late 1990s, the largest independent producer of cold-drawn steel bars in the United States, with annual output of 300,000 tons. It consisted of two subsidiaries: Niagara LaSalle Corporation, a manufacturer of such bars, and LaSalle Steel Corporation, a producer of specialized as well as standard cold-finished steel bars. Niagara's products were being used primarily in the U.S. and Canadian automotive and machine tool industries. The company was assembled in the 1990s by the acquisition of three separate manufacturing firms.
International Metals Acquisition: 1993-95
Niagara was founded in 1993 by Michael J. Scharf as International Metals Acquisition Corporation, with the objective of acquiring an operating business engaged in the metals processing and distribution industry or metals-related manufacturing industry. Scharf was chairman, president, and chief executive officer of the firm, which was based in New York City and raised $15 million in a public offering of stock that year. Scharf, who said in 1994 that he had $50 million in equity for a purchase, had been in the metals distribution business since 1970, when he founded Unimet Corporation, a specialty processor with initial capital of $450,000 that was sold in 1973 for at least $14 million. In 1983 he took a one-quarter stake in Edgcomb Steel of New England Inc. for $4 million and, after the 1984 acquisition of a metals service center chain, turned it into the largest independent metals processor. Edgcomb's 1986 leveraged buyout netted its shareholders $150 million, and the 1989 sale of the company brought them another $100 million.
Scharf's objective in 1993 was to buy a metals service center as part of a planned chain of small metals distribution firms. Instead, however, he changed course and in 1994 offered at least $105 million to acquire New Jersey Steel Corporation, a producer of steel reinforcing bars used in reinforced concrete by the construction industry. After he tried to revise the deal by offering less cash and more International Metals stock, New Jersey Steel terminated the tentative agreement in early 1995. Scharf said he had changed his offer because he perceived a "diminution of the company's value."
Following the collapse of this proposed acquisition, Scharf purchased Niagara Cold Drawn Corporation in 1995. Niagara owned the property that had been the Buffalo steel plant of Bliss & Laughlin Industries Inc. from 1929 to 1971, when it was producing cold-finished steel bars for heavy equipment moving mechanically, such as automobiles, appliances, and construction and farm equipment. This 193,000-square-foot mill was closed by a strike in 1971 and was sold the following year to Ramco Steel Inc. for an undisclosed sum in cash. The owner in 1985, Ramco-Fitzsimmons Steel Co. Inc., went bankrupt that year, and the plant closed again. It reopened in 1986 under Niagara Cold Drawn Corporation, a company owned mainly by Allister Corporation, and continued to process hot-rolled steel bars into cold-finished flat steel bars between six and 48 inches wide for steel service centers and screw machine shops.
Niagara Cold Drawn was also leasing a smaller mill in Chattanooga, Tennessee, in 1992, when it was 80 percent owned by Adage Inc., which had acquired Allister. Adage sold Niagara Cold Drawn to International Metals Acquisition for $10.7 million in cash. "I was attracted to Niagara for a variety of factors," Scharf told American Metal Market in June 1995, "one being that it has a consistent record of growth. It has excellent management; it's a good facility; it has an excellent product, good potential for growth and is very service oriented." Scharf needed to make an acquisition because International Metals' charter required the company to dissolve and return the money raised from investors if it did not acquire a company within two years of the initial public offering of stock in August 1993. The purchase called for Niagara's senior managers to continue in their posts for five years. International Metals Acquisition then changed its name to Niagara Corporation.
Southwest and LaSalle Acquisitions, 1996-97
Niagara Cold Drawn, in early 1996, purchased Southwest Steel Co., Inc., a manufacturer of cold-drawn steel bars, for $3.1 million in cash and promissory notes and the assumption of $9.4 million in debt. This company had been producing cold-finished steel bars in Catoosa, Oklahoma, a suburb of Tulsa, for more than ten years under the name Sauk Southwest Steel Co. before it changed its name to Southwest Steel Co. Inc. in 1991. The company built a new cold-finished steel-bar plant in 1995 in Midlothian, Texas, across the road from Chaparral Steel Co., its main supplier of hot-rolled bars. This mill was expected, by 1998, to raise Southwest's annual output from about 25,000 to about 60,000 tons and also raised its size range to five-inch-diameter round bars. Sixty-five percent of its customers were service centers, which had been turning elsewhere to meet their larger size needs.
Southwest was merged into Niagara Cold Drawn and vacated its Oklahoma plant. Niagara Corporation's net sales rose from $17 million in 1995 to $74.8 million in 1996. Its net income increased from $344,000 to nearly $1.1 million.
Niagara Corporation, in 1997, purchased LaSalle Steel Co. from Quanex Corporation for $66.9 million in cash. LaSalle was making cold-finished bars in Hammond and Griffith, Indiana, and Spring City, Pennsylvania, when it was purchased in 1981 by Quanex Corporation for $52 million in cash and notes. LaSalle had sales of $158.5 million, operating income of $10.4 million, and earnings of $5.6 million in fiscal 1996 (the year ended October 31, 1996). Its two remaining Indiana plants were making cold-finished and chrome-plated steel bars for the automotive and durable-goods markets. The acquisition enabled Niagara's net sales to reach nearly $205 million in 1997. Its net income came to $1.9 million.
The LaSalle purchase made Niagara the largest independent producer of cold-drawn steel bars in the United States. These bars were being manufactured for a smooth and shiny surface, uniform shape with close size tolerance, enhanced strength characteristics, and improved machinability, characteristics essential for many industrial applications. The Hammond plant experienced a nine-week strike in 1998, but Scharf claimed that orders were not affected because of the hiring of about 100 replacement workers and boosted production by the other plants.
Niagara Corporation in the Late 1990s
Niagara Cold Drawn, now renamed Niagara LaSalle, was manufacturing round bars ranging from a quarter-inch to six inches in diameter and rectangular, square, and hexagonal bars in a variety of sizes, the majority of which were drawn, or pulled, in sizes of a quarter-inch to six inches thick and up to 15 inches wide. The length varied from ten to 20 feet, with most ten to 12 feet. Niagara LaSalle's products in 1997 included cold-drawn bars used in machining applications, automotive and appliance shafts, screw-machine parts, and machinery guides; turned, ground, and polished bars used in precision shafting; and drawn, ground, and polished bars used in chrome-plated hydraulic cylinder shafts.
LaSalle, a technological leader in the development of specialized cold-drawn steel products, had pioneered in the large drawbenches that were commonly used in cold finishing and had developed the principle of stress-relieving cold-finished steel bars. It was employing a number of advanced processing techniques in the manufacture of value-added steel bars, including thermal treatment and chrome plating. In addition to cold-drawn bars, LaSalle's products included custom-cut bars shipped on a just-in-time basis for steering columns and shock absorbers; stress-relieved bars used in high-strength shafting, gears, and drive mechanisms; quench and tempered bars used in high-strength bolting and high-impact rod cylinders; and chrome-plated bars used in hydraulic and pneumatic cylinders.
Steel service centers accounted for about 77 percent of Niagara's sales in 1998, with the balance coming from original equipment manufacturers (OEMs) and the screw machine industry. Steel service centers purchase and warehouse large amounts of standardized steel products for direct sale to OEMs. Of about 650 active customers in the United States and Canada in 1998, Niagara's three largest were Alro Steel Corporation, A.M. Castle & Co., and Earle M. Jorgenson Co. These three accounted for about 44 percent of sales.
Niagara LaSalle owned manufacturing facilities in Buffalo and Midlothian, Texas, in 1998 and was leasing a manufacturing plant in Chattanooga. LaSalle owned manufacturing facilities in Hammond and Griffith, Indiana. These five Niagara plants were operating at about 75 percent of capacity. Leased headquarters for the parent company were in New York City. Michael J. Scharf held a 12.7 percent stake of Niagara in June. His brother Gilbert, the company's secretary, held 5.6 percent. In 1998 the company posted sales of over $207 million.
Principal Subsidiaries: LaSalle Steel Corporation; Niagara LaSalle Corporation.