Point named as sale option

Mittal told to divest to avoid monopoly

August 02, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

Mittal Steel Co. NV must sell either Sparrows Point or a sister plant in Weirton, W.Va., if it can't dispose of a Canadian subsidiary to resolve antitrust issues arising from its merger with Arcelor SA, Justice Department officials said yesterday.

Saying the combined company would have a monopoly on tin production in the United States, the Justice Department filed a civil lawsuit in U.S. District Court in Washington yesterday to block the $33 billion merger if Mittal does not comply.

"Without a divestiture of one of these steel mills, purchasers of tin mill products likely would have paid higher prices that would have harmed American consumers," Thomas O. Barnett, assistant attorney general in charge of the department's antitrust division, said in a statement issued yesterday.

Mittal Steel spokesman David Allen said he had no comment as of yesterday evening on the Justice Department statement.

Mittal, based in Rotterdam, Netherlands, promised the Justice Department that it would sell Canadian steel and tin manufacturer Dofasco, an Arcelor subsidiary, to German-owned ThyssenKrupp AG if its hostile takeover bid for Arcelor succeeded.

However, in one of a series of defensive moves to fend off Mittal, Luxembourg-based Arcelor transferred Dofasco to a Dutch trust to make any future sale difficult.

After a five-month battle, Arcelor's board agreed to a merger in late June after Mittal improved its offer for the third time and made concessions on corporate control.

Arcelor shareholders approved the deal last week. The combined company, to be called Arcelor-Mittal, would control 10 percent of the world's steel production with more than 110 million tons annually.

However, despite the merger agreement, Arcelor officials still refuse to sell Dofasco, which makes high-grade sheet metal for the auto industry. Arcelor will have majority control over the combined company's board seats, and will have influence in decision-making.

In May, the Justice Department warned Mittal that if it could not sell Dofasco, it would have to divest "alternative assets" that weren't named until yesterday.

Sparrows Point workers had been concerned that their plant might be an "alternative" to Dofasco since late May, when representatives from ThyssenKrupp toured the plant. If Sparrows Point were sold, it would be to the plant's fourth owner in three years.

John Cirri, president of United Steelworks Local 9477, which represents hourly production workers at Sparrows Point, said the plant's nearly 2,500 employees should not worry. Sparrows Point is more efficient and profitable than it has ever been, he said, and while he believes the plant would be the last of the three to be sold, a new owner wouldn't necessarily be a bad thing.

"Regardless of what the outcome is, we'll stay the course," he said yesterday.

Meanwhile, Sparrows Point is again making steel after its giant "L" blast furnace, which makes the molten iron that is mixed with scrap metal to produce steel, broke down after a power outage on June 23. While it's not up to full capacity, Cirri said, steelmakers are "back on their feet."

About 150 workers took voluntary layoffs of up to four weeks while technicians worked round the clock to get the furnace working again. The outage cost the company nearly a month's worth of steelmaking, which should be covered by insurance, officials said.

allison.connolly@baltsun.com

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