Sparrows Point sale possible

Mittal starts showing mill to potential buyers

ThyssenKrupp is interested

June 01, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

Mittal Steel Co. NV has begun showcasing its Sparrows Point steel mill to potential buyers, believing that it might have to sell the plant for antitrust reasons if it wins a hostile takeover fight for its biggest global rival, Arcelor SA.

Mittal officials confirmed yesterday that representatives of German steelmaker ThyssenKrupp AG expressed interest after touring the Baltimore County complex last week.

Plant general manager Thomas Russo declined to comment on the ThyssenKrupp visit, other than to say he was "glad we have interest."

Bernd Overmaat, a spokesman for ThyssenKrupp, said in an e-mailed response from Germany that the visit by a group of technicians was "part of normal business." ThyssenKrupp does not currently do business with Sparrows Point, Mittal officials said.

If Mittal sells Sparrows Point to ThyssenKrupp or another company, it would be the plant's third owner in four years.

The visit comes as Arcelor bulks up its holdings to make Mittal's takeover more difficult and attract scrutiny from antitrust regulators. On Friday, Arcelor announced a merger with Russian-owned OAO Severstal, which would create the world's largest steelmaker.

John Cirri, president of United Steelworkers Local 9477, which represents hourly workers at Sparrows Point, confirmed that management is shopping the plant to ThyssenKrupp, but he said a sale wouldn't necessarily be a bad thing.

If Sparrows Point became ThyssenKrupp's flagship in the United States, Cirri said, the company probably would invest money in the plant, which would "guarantee its long-term survival."

International Steel Group, including Sparrows Point, was sold to Mittal last year, less than two years after ISG bought the plant from bankrupt Bethlehem Steel.

Today, fewer than 2,500 workers produce about 3 million tons of steel a year, a far cry from the 26,500 workers who produced 5.8 million tons of steel in 1969.

Mittal officials have spoken with the Justice Department about potential antitrust issues related to its Arcelor bid, Mittal spokesman David Allen said. Mittal produces almost half the nation's tin-plated steel, he said.

ThyssenKrupp, which supplies high-grade sheet steel to the U.S. auto industry, has been shopping for a plant in North America. It was outbid by Arcelor earlier this year to buy the Canadian steel and tin manufacturer Dofasco.

To appease European regulators, Mittal promised to sell Dofasco to ThyssenKrupp if its bid for Arcelor is successful. But Arcelor has built a legal fence around Dofasco that would make it difficult for Mittal to sell.

Arcelor shareholders are expected to vote on the Severstal merger and the Mittal offer June 28.

Justice Department officials said last month that if Mittal acquires Arcelor but cannot sell Dofasco, it will have to "divest certain alternative assets to a buyer acceptable to the department."

Allen declined to comment on whether Mittall is considering substituting Sparrows Point for Dofasco if it is unable to sell the Canadian firm to satisfy regulators.

"Our leadership expects to complete the Arcelor acquisition and divest Dofasco in that deal," he said.

While Mittal officials said divestiture would be done to avoid antitrust issues related to the takeover, they may also be looking to cut costs as they raise their bid for Arcelor, now valued at $33 billion.

Sparrows Point is one of the most expensive plants in Mittal's portfolio, and it has undergone a significant downsizing over the past five years.

Once the largest steel plant in the world, Sparrows Point today accounts for 5 percent of Mittal's total worldwide output of nearly 60 million tons a year. Under a Mittal-Arcelor combination, Sparrows Point would contribute only 3 percent of the total output.

Mittal, based in the Dutch port of Rotterdam, became the world's largest steelmaker by buying up plants and mines around the world and cutting costs. Mittal's plants are constantly pitted against each other, and those that don't perform are downsized or closed. Sparrows Point has done well in these quarterly contests, the Mittal vice president of operations in Chicago told The Sun earlier this month.

The plant is more efficient and productive than it has ever been, and its designation as the only integrated steel plant on the East Coast would make it an attractive purchase, said John Anton, a steel consultant with Global Insight, a research service in Washington.

allison.connolly@baltsun.com

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