U.S. Steel Signs Letter of Intent

Pittsburgh-based United States Steel Corporation announced today that it has signed a letter of intent to sell its Clairton, Pa., and Gary, Ind., coke operations, its Minnesota iron ore operations (Minntac) and its wholly owned transportation services subsidiary Transtar Inc. (Transtar) to an entity formed by affiliates of Apollo Management L.P. of New York City.

The transaction is subject to the negotiation of definitive agreements and other customary conditions, including approvals from the board of directors, lenders and regulatory agencies. The parties plan to reach definitive agreements by year-end 2002 with closing expected to follow in the first quarter of 2003.

Under terms of the letter of intent, it is anticipated that U. S. Steel would receive approximately $500 million in cash and retain about a 20 percent interest in the new company, with the new company assuming all collective bargaining agreements, certain employee benefit obligations and certain other liabilities. U. S. Steel currently estimates the transaction could result in a pre-tax loss of up to $300 million.

The new company and U. S. Steel plan to enter into long-term contracts to supply U. S. Steel with its domestic iron ore and coke requirements and to provide U. S. Steel with transportation services.

U. S. Steel Chairman, CEO and President Thomas J. Usher says, "This sale would enable us to re-deploy capital to other potential uses such as strategic acquisition opportunities, debt reduction, or voluntary contributions to employee benefit plans."

He adds, "This would be an important step in our strategy to focus on growing our higher value-added domestic operations and to continue to expand globally. At the same time, we would secure a stable, long-term supply of our critical raw material requirements at market-based prices and preserve the vital transportation services provided through Transtar.

"We believe the sale of these assets would be in the best interests of all of our stakeholders. We are also pleased to participate as a minority equity owner with Apollo in the growth of these excellent businesses in the years ahead."

Charles C. (Chuck) Gedeon, currently executive vice president-raw materials for U. S. Steel, will leave U. S. Steel to lead the new company. Gedeon, who started in the steel industry as a laborer, has more than 40 years of experience covering virtually every aspect of the steelmaking process. He has been responsible for the raw materials operations since he joined U. S. Steel in 1986. Operating managers and employees of Clairton Works, Gary Coke, Minntac and Transtar also will join the new company.

Josh Harris, a founding partner of Apollo, says, "We are extremely pleased to be partnering with the domestic industry's premier steel producer and excited about the growth prospects for the new company. The leadership of Chuck Gedeon, the experienced management team and the corps of dedicated employees at these facilities are a strong formula for success."

Apollo, formed in 1990, is a private equity fund based in New York. Since its inception, Apollo and its affiliates have managed the investment of over $13 billion in capital in a wide variety of industries.

Clairton Works and Gary Coke operations are both ISO 14001 certified and are leaders in environmental stewardship. Clairton Works employs about 1,500 people and is the country's largest coke producer, with an annual capacity of 4.6 million net tons. The Gary Coke operations have approximately 550 employees and an annual capacity of 2.1 million net tons.

Minntac, U. S. Steel's taconite mining operations in Mt. Iron, Minn., mines iron-bearing taconite and converts it into high-iron content pellets in a process called beneficiation. With an annual production capacity of 16.4 million net tons, Minntac is the largest producer of taconite pellets in North America and employs about 1,550 people. At the end of 2001, U. S. Steel had 695 million net tons of iron ore reserves, all of which were and would continue to be assigned to Minntac.