Mittal in talks to sell Weirton

Sale of W.Va. steel plant to Esmark would likely keep Sparrows Point in hands of conglomerate

January 19, 2007|By Allison Connolly | Allison Connolly,Sun reporter

Sparrows Point owner Mittal Steel Co. NV said yesterday it is in negotiations with Esmark Inc. of Chicago to sell part or all of its plant in Weirton, W.Va., a sale that would likely keep the Baltimore County steel mill in the hands of the world's largest steel conglomerate.

Netherlands-based Mittal has previously said it would sell either Weirton or Sparrows Point to satisfy Justice Department concerns that Mittal would have a monopoly on tin production in the United States after its $33 billion merger with Arcelor SA of Luxembourg. The combined company, to be named Arcelor Mittal, would be the world's largest steel producer with annual output of more than 110 million tons.

But the Justice Department has the final say, and it wants Mittal to sell another subsidiary, Dofasco Inc., by Jan. 28.

"The matter is still open and pending," Justice Department spokeswoman Gina Talamona said yesterday. She declined to comment about Mittal's negotiations with Esmark, which took control late last year of nearby Wheeling-Pittsburgh Steel Corp.

Dofasco, a profitable Canadian company that makes high-grade metal sheet for the North American auto industry, is tied up in a Dutch trust, and Mittal said last week that it will not sue to release it.

During its nearly six-month pursuit of Arcelor, Mittal had promised to sell Dofasco to German steelmaker ThyssenKrupp AG if it were successful. However, in an effort to thwart Mittal's advances, Arcelor transferred Dofasco to a Dutch foundation.

Despite agreeing to the merger in June, Arcelor has no control over the trust, which prevents a sale for five years unless the trustees approve.

The three-member board has already rejected a proposal by Mittal to sell it to ThyssenKrupp for $4.6 billion, less than the $4.86 billion price Arcelor paid.

ThyssenKrupp initiated legal action against Mittal to force it sell Dofasco, but a judge has yet to make a decision in the case.

With a fence around Dofasco, it appears Mittal has turned its focus to Weirton.

Mittal spokesman David Allen said yesterday that Mittal and Esmark have signed a "nonbinding memorandum of understanding reflecting certain positions" but there has not been any agreement on "final deal terms."

"There are several other significant contingencies that need to be resolved," he said. "Therefore, it is not certain whether or when a definitive agreement will be announced."

While Allen declined to elaborate on what those contingencies are, any agreement would likely hinge on what the Justice Department decides.

Esmark officials did not return a phone call yesterday.

Mark Glyptis, president of the Independent Steelworkers Union, which represents workers in Weirton, said workers are trying to stay positive. He said the union has had extensive conversations with a potential investor, Mitchell Hecht, but almost no contact with officials from Esmark other than a tour a few months ago.

"I don't want anyone to forget that the Justice Department is in control here," he said.

It is the latest in a flurry of deal-making by Mittal, which is buying plants and ore mines around the world as the steel industry continues to undergo a consolidation which started in haste during the late 1990s. Mittal is Sparrows Point's third owner since 2003, after longtime owner Bethlehem Steel Corp. went bankrupt and sold its assets to International Steel Group, backed by investor Wilbur Ross.

Ross, who also owned Weirton, slashed ISG's work force and sold it to Mittal in 2005 for a $267 million profit.

Under Mittal, Sparrows Point has fared far better than Weirton. Mittal pits its plants against each other to wring out inefficiencies, and doles out work to the most profitable and productive. Last year, Mittal idled Weirton's blast furnace and sent the hot work to Baltimore County.

Glyptis hopes a buyer will restart the blast furnace and bring back 1,000 workers who were laid off last year; however, its biggest asset right now is tin plate.

A call late yesterday to John Cirri, president of United Steelworkers Local 9477, which represents production and maintenance workers at Sparrows Point, was not returned. Previously, he has said a sale of Sparrows Point would not be a bad thing if the buyer invested in the plant, which is not slated to receive any capital investment from Mittal for two years aside from environmental upgrades.

Nearly 2,500 people work at Sparrows Point.

On Wednesday, Mittal announced that it would boost production to normal over the next six months, after scaling back during the fourth quarter. Workers at Sparrows Point were offered voluntary furloughs between October and January.

Mittal stock closed down 19 cents yesterday to $40.95 on the New York Stock Exchange.

allison.connolly@baltsun.com

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