Mittal calls Arcelor bid a success

Point's sale in question

July 19, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

Mittal Steel Co. NV said yesterday that it has succeeded in its $32 billion takeover bid for Luxembourg-based Arcelor SA, having acquired half of Arcelor's shares.

While the final tally won't be announced until next Wednesday, Mittal officials said they are confident that enough Arcelor shareholders have agreed to sell their shares to Mittal, which is based in Rotterdam, the Netherlands. The merger would create the world's largest steelmaker, to be called Arcelor-Mittal, with annual production of more than 110 million tons.

The deal raises questions about whether Mittal will sell its steel mill at Sparrows Point to assuage regulators' antitrust concerns.

After a five-month battle, Arcelor surrendered to Mittal's advances last month and agreed to a merger. To avoid antitrust issues, Mittal had promised to sell Canadian steelmaker Dofasco, which provides high-grade sheet metal to the auto industry, to German-owned ThyssenKrupp AG.

However, in one of a series of defensive moves to thwart Mittal's takeover bid, Arcelor transferred its Dofasco unit to a Dutch foundation to make a sale difficult.

Despite their merger agreement, Arcelor officials still refuse to approve Dofasco's sale. Arcelor will hold a majority of seats on the new company's board and will have considerable say in decision-making.

If Mittal is unable to sell Dofasco, Justice Department officials said, Mittal must divest itself of "alternative assets," according to the agreement reached May 12. Two weeks later, representatives from ThyssenKrupp toured Sparrows Point, plant officials confirmed.

But whether Sparrows Point is put up for sale depends on what the Justice Department considers a monopoly, said steel consultant Charles Bradford of New York City-based Bradford Research Inc.

If the government is concerned about a concentration in steel production for the automotive industry, then Mittal probably wouldn't offer Sparrows Point as an alternative, he said. Mittal's plant in East Chicago, Ind., would be a more likely candidate, Bradford said, because it makes high-grade steel for the auto industry.

However, if the government is focused on tin production, then Sparrows Point or its sister plant in Weirton, W.Va., might be options, he said, because Mittal and U.S. Steel produce nearly all of the tin in the United States. But they wouldn't be attractive trades for Dofasco, which is bigger and highly profitable, Bradford said.

Then again, he added, Mittal may sell assets to pay for its merger with Arcelor.

Justice Department spokeswoman Gina Talamona said the government hadn't planned on making any more recommendations until Mittal's plans are known.

While the combined company will control 10 percent of the world's steel production, it's not a monopoly by any means, said steel consultant John Anton. Geographically, the companies don't overlap; Mittal doesn't have a presence in Europe, where Arcelor is concentrated. "It's not going to shake the world," said Anton, of Global Insight in Washington. "It's more of a long-term threat."

Neither Anton or Bradford could say how soon Arcelor-Mittal will make a decision about Dofasco or other plants.

Meanwhile, technicians at Sparrows Point are working to restore the plant's giant "L" blast furnace, which broke down after a power outage June 23. Mittal officials said the furnace - which makes the molten iron that is mixed with scrap metal to produce steel - should be back at capacity by Friday. "We're still on track," Mittal spokesman David Allen said yesterday. "It's been a matter of nursing it along." Once iron starts flowing, steel slabs can be made, he said.

About 150 of the plant's nearly 2,500 workers took voluntary layoffs of up to a month. They could be called back if needed.

Mittal officials estimate the outage will cost the company 250,000 tons of iron-making, nearly a month's work. The loss should be covered by insurance, they said.

allison.connolly@baltsun.com

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