One Major ESOP Sells; Another Starts

Employee-owned Republic Engineered Steels has agreed to be purchased by Blackstone Capital Partners and Veritas Capital Partners in a $420 million transaction. Republic, which is listed on the NYSE, is 54% owned by an ESOP. Employees bought the company in 1989 from Republic-LTV to save it from closing. The company made considerable progress in its early years and was eventually able to go public, but it has been struggling in recent years, and its stock price has been stagnant. ESOP participants will have to vote on the offer, but the United Steelworkers, which organizes the employees at Republic, was very positive about the proposed transaction, seeing it as an opportunity to add much needed capital. Republic's stock rose 52% when news of the offer was made public. The future of the ESOP in the new company was not disclosed.

While Republic will likely now drop from the list of major employee-owned companies, another company is taking its place. In what appears to be the largest ESOP transaction in the last few years, an ESOP is buying 100% of Ferrellgas Partners LP. The company employs 4,500 people, serving 800,000 customers in 45 states with liquid propane. It is the second-largest company in its industry. It was principally owned by the Ferrell family, but was also traded on the NYSE. The company is profitable; the transition apparently was motivated by the family's desire to see the employee become owners. The ESOP borrowed $380 million for the transaction, with the money borrowed through private placement.