USX Plans to Split Energy, Steel Businesses

By Joe Mandak Associated Press Writer Published: Apr 24, 2001

PITTSBURGH (AP) - USX Corp. plans a reorganization that would separate its energy and steel businesses, spinning off its steel operations into a freestanding, publicly traded company. USX currently is parent to two divisions, USX-U.S. Steel Group and USX-Marathon Group. Each of the divisions has stock that is traded separately on the New York Stock Exchange although they share the same corporate parent.

The planned spinoff would completely separate Pittsburgh-based U.S. Steel from Marathon, which is based in Houston. USX said splitting the businesses will give the companies more flexibility to expand through acquisitions.

The new steel company will be known as United States Steel Corp. Shareholders of USX-U.S. Steel Group common stock will become shareholders in the new company.

Current holders of USX-Marathon Group common stock will become holders of Marathon Oil Co. stock.

U.S. Steel, like other American steel makers, has been struggling recently, saying unfairly traded foreign imports are hurting business. In the first quarter of the year, the USX division reported a loss of $98 million, or $1.12 a share, when taking into account one-time costs.

Marathon Group, meanwhile, saw earnings rise substantially in the same period, driven by higher fuel prices.

Chairman and chief executive officer Thomas Usher on Tuesday announced the reorganization at USX Corp.'s 100th annual shareholders meeting in Columbus, Ohio.

The reorganization comes after USX officials in November authorized a review of the corporation's capital structure.

"In this regard, Credit Suisse First Boston and Salomon Smith Barney reviewed many options that would be available to the board in an effort to make Marathon and U.S. Steel more competitive in their industries," Usher said in a statement.

"The board believes that a tax-free spin off of our steel business is in the best interest of all of our shareholders."

USX plans to give shareholders no cash payment as part of the conversion.

"There will be no capital gains (tax)," said USX spokesman Don Herring. "In other words, you hold this stock, we give you new stock and nothing happens as far as any tax liability."

USX officials said employees of the U.S. Steel and Marathon groups should not be affected by the plan, and no changes in any retiree benefits will result.

The reorganization must still be approved by a majority of shareholders in each USX Corp. stock group at a special meeting likely to be held in the fourth quarter of this year.

The Internal Revenue Service must also approve the tax-free stock conversion plan, Usher said.

"We are extremely enthusiastic about this plan and we believe that as a result, both the energy and steel operations of USX will be well positioned to succeed and prosper," Usher said.

U.S. Steel was incorporated in 1901 when the steel businesses of J.P. Morgan and Andrew Carnegie combined to form the first billion-dollar corporation.

U.S. Steel acquired Marathon Oil Co. in 1982, and merged with Texas Oil & Gas Corp. in 1986, with Texas Oil & Gas also becoming another U.S. Steel subsidiary. Later that year, U.S. Steel became USX Corp. with four business units: Marathon Oil Co., Texas Oil & Gas Corp., USS (the steel business of USX) and U.S. Diversified Group.

In 1991, USX Marathon Group and USX-U.S. Steel Group begin trading as separate stocks intended to track the performance of those respective business units.

In morning trading on Tuesday on the NYSE, USX-U.S. Steel shares were up nearly 8 percent, or $1.27 a share, at $17.16, while USX Marathon shares gained 76 cents a share at $32.13,

---

On the Net:

USX Corp., http://www.usx.com

AP-ES-04-24-01 1128EDT

-- Anonymous, April 24, 2001