Mittal says sale of Point is possible

1 of 2 plants to go on market in 90 days

August 03, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

Mittal Steel Co. NV officials said yesterday that they will likely put either Sparrows Point or its sister plant in Weirton, W.Va., up for sale in the next 90 days to appease U.S. regulators who are concerned that Mittal's $33 billion merger with Luxembourg-based Arcelor SA gives it a monopoly on tin-plate production.

During a news conference yesterday, Chief Financial Officer Aditya Mittal said the company probably cannot sell Arcelor's Canadian subsidiary, Dofasco, because it is held within a trust that Mittal cannot dissolve. Mittal initially promised U.S. regulators it would sell Dofasco to German steelmaker ThyssenKrupp AG if its takeover of Arcelor succeeded.

"It is not possible, legally, to sell Dofasco," said Arcelor Chief Financial Officer Gonzalo Urquijo. "We keep it because it cannot be sold. That's it."

With Dofasco seemingly off the table, Mittal would have to put either Sparrows Point, in Baltimore County, or the former Weirton Steel complex up for sale. On Tuesday, the Justice Department filed suit in U.S. District Court in Washington to block the merger if Mittal does not divest one of the three plants.

Aditya Mittal said yesterday that the company has at least 90 days to decide which plant it wants to sell, and then the Justice Department must sign off on the buyer. He said a sale would likely happen later this year.

Sparrows Point General Manager Thomas Russo said he was disappointed to hear that the plant, which was owned for many years by Bethlehem Steel, could be sold for the third time in as many years. But he said he understands that it's a business decision.

"The people here are concerned about who we might be sold to," Russo said yesterday. "Is it a company that will invest here and sustain the business?"

Few companies are obvious candidates to buy either plant, said steel analyst Charles Bradford, of New York City-based Bradford Research Inc.

Only two companies other than Mittal make tin in the U.S.: U.S. Steel, which has 45 percent of the market, and Wheeling-Pittsburgh, which has about 15 percent, Bradford said. He doesn't believe any other companies will get into the tin business because it has declined steadily over the years as beverage companies switched to plastic and aluminum bottles. However, the business is profitable for the few players already in it, he said, making cans for soup, paint and hairspray.

Representatives of ThyssenKrupp visited Sparrows Point in late May after the Justice Department initially told Mittal it would have to sell either Dofasco or "alternative assets" if the merger goes through. But Bradford said ThyssenKrupp wouldn't view it as a suitable substitute for Dofasco, which makes high-grade tin for the auto industry.

"It is highly unlikely someone like TK would pay anywhere near what they would for Dofasco," he said.

Bradford believes Russian steelmakers could make a play for Sparrows Point as an entry point to North America.

Meanwhile, a former executive from International Steel Group, which bought Weirton and Sparrows Point and other assets from bankrupt Bethlehem Steel in 2003 and sold them to Mittal last year, has publicly expressed interest in Weirton.

Mitchell Hecht, ISG's former CFO, told workers he wants to restart the plant's two blast furnaces, which were shuttered last year, and rehire hundreds of people, said David Gossett, spokesman for the Independent Steelworkers Union, which represents Weirton's hourly production workers. The Weirton plant employs 1,300, while Sparrows Point has nearly 2,500.

John Cirri, president of United Steelworkers Local 9477, which represents production workers at Sparrows Point, said he believes Mittal is more likely to sell Weirton but he won't know it until it happens.

"If we get a new owner coming in, we'll make sure we sit them down at the table and talk about capital investments," he said.

Tomorrow, Mittal plans to unveil the management team of the combined company, to be named Arcelor Mittal. Yesterday, the companies announced second-quarter earnings.

Combined, Arcelor Mittal reported second-quarter net income of $1.6 billion on revenue of $22.4 billion.

Also yesterday, Urquijo said Mittal is not "obliged" to buy a minority stake in Arcelor Brasil SA, which would raise Mittal's purchase price for Arcelor. On Tuesday, Brazilian regulators said Mittal should make the same offer to Arcelor Brasil shareholders.

allison.connolly@baltsun.com

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