Steel plan rejected

Blockage puts Sparrows Point sale back on table

November 14, 2006|By Allison Connolly | Allison Connolly,Sun Reporter

The likelihood of a sale of the Sparrows Point steel mill or a sister plant in West Virginia increased yesterday, after a Dutch foundation refused to allow its owner, steel giant Arcelor Mittal, to sell a Canadian subsidiary to settle U.S. antitrust issues.

In a statement yesterday, Arcelor Mittal said the foundation, which controls Dofasco Inc., had rejected its request to dissolve, allowing a Dofasco sale to go forward.

If Dofasco isn't sold, the U.S. Department of Justice will require Arcelor Mittal to sell either the Baltimore County plant or one in Weirton, W. Va., to avoid a monopoly on tin plate production.

Mittal spokesman William Steers said executives are discussing the company's options with the Justice Department and as of late yesterday had not yet asked for an extension of the Nov. 28 deadline to sell Dofasco.

Dofasco is protected by an independent Dutch foundation that blocks its sale for five years without the consent of its trustees. Luxembourg-based Arcelor SA purchased Dofasco earlier this year and transferred its shares to the foundation, Strategic Steel Stichting, in an effort to thwart Mittal's hostile takeover bid. Mittal Steel Co. NV of Rotterdam, the Netherlands, had promised to sell Dofasco to German steelmaker ThyssenKrupp AG if its bid for Arcelor was successful.

Arcelor finally agreed to merge with Mittal in June, and shareholders approved the $33.5 billion deal in August. The merger should be completed by April.

Despite the fact that the boards of both Mittal and Arcelor requested that the sale be allowed, the three-member board that controls the foundation formally rejected the idea Friday, Arcelor Mittal said yesterday. The foundation board consists of Allan Tuttle, a partner at Washington -based Patton Boggs LLP, former Arcelor board member Robert Hudry and former Arcelor legal affairs chief Federik Van Bladel.

Tuttle did not return a call yesterday seeking comment.

In a statement yesterday, ThyssenKrupp officials said the company will "exhaust every possibility to bring about the sale of Dofasco to ThyssenKrupp, as bindingly agreed by Mittal Steel."

Steel analyst John Anton, with Washington, D.C.-based Global Insight Inc., said the foundation, though set up by Arcelor, appeared to be adhering to its charge to act independently.

"It was designed to be a poison pill, which Mittal decided to swallow anyway," Anton said.

Dofasco makes high-grade sheet metal for the auto industry, and Anton believes the trustees refused to release it because Mittal's asking price was too low. Mittal promised to sell Dofasco to ThyssenKrupp for $4.6 billion - less than the $4.86 billion price Arcelor paid.

Mittal does not owe Thys- senKrupp a fee if the deal fizzles. If it is unable to buy Dofasco, ThyssenKrupp has said it is scouting locations in Alabama, Arkansas and Louisiana to build two plants at a cost of $3 billion.

While Arcelor Mittal has said it preferred to sell Weirton, the Justice Department would decide which of the two U.S. plants would be sold and to whom.

"Sparrows Point is a higher- quality facility, but Weirton fits a niche," Anton said.

Both were formerly owned by International Steel Group in 2003, which bought them from bankrupt owners Bethlehem Steel Co. and Weirton Steel Co. ISG sold out to Mittal in 2005. In a series of cost-cutting moves, Mittal shut down the Weirton plant's blast furnace and moved some tin production to Sparrows Point because the Baltimore County plant was more efficient. About 1,000 Weirton workers lost their jobs.

Weirton's remaining 1,300 workers want Mittal to sell the facility to someone who would restart the furnace and resume full-scale tin production, said Mark Glyptis, president of the Independent Steelworkers Union. He said the trustees' decision not to sell Dofasco may speed up that process.

"We're viewing it as a very positive thing," he said.

allison.connolly@baltsun.com

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