Point bidder awaits Mittal

But Esmark offer for local steel mill may be first of many

March 22, 2007|By Allison Connolly | Allison Connolly,Sun reporter

Chicago-based Esmark Inc. is still awaiting word from investment bankers for Mittal Steel Co. NV on whether its bid for the steel mill at Sparrows Point passes muster.

The Justice Department ruled last month that Mittal, the world's largest steelmaker, must sell Sparrows Point to settle antitrust concerns arising from its $33 billion merger with Arcelor SA of Luxembourg.

At the time, Mittal had signed a nonbinding agreement to sell a sister plant in Weirton, W.Va., to Esmark in hopes of satisfying antitrust concerns over tin plate production. Weirton would have been a good fit for Esmark, which recently purchased nearby Wheeling-Pittsburgh Corp.

Immediately after the Justice Department eliminated Weirton as an option, Esmark's Chairman and Chief Executive Officer James P. Bouchard told The Sun he planned to make an offer for Sparrows Point.

Under the Justice Department timetable, Mittal has less than two months remaining to sell Sparrows Point, although the Dutch company can ask for a 60-day extension.

"A dozen" potential buyers, including U.S. private equity firms and non-U.S. steelmakers are interested in the Sparrows Point plant, Louis Schorsch, chief executive officer of Mittal's flat-products unit in the Americas, told Bloomberg News in an interview in Chicago last month.

Other companies expected to submit offers include Companhia Siderurgica Nacional (CSN) of Brazil, which first looked at Sparrows Point in 2001 when it was being sold by bankrupt Bethlehem Steel Corp. CSN recently lost a takeover bid for Wheeling-Pitt to Esmark.

Other possible bidders for Sparrows Point are Russia's OAO Severstal, which failed to outbid Mittal for Arcelor, and Evraz Group SA, the Luxembourg firm that recently purchased Oregon Steel Mills Inc. in Portland, according to steel analyst Charles Bradford in a recent Sun interview.

Several Chinese companies also are interested in expanding in the United States and they have cash, he said.

Sparrows Point would be an attractive purchase for foreign companies looking for an entry point into the U.S. steel market.

The Baltimore County waterfront plant could accept cheap slab from South America. Its relatively new cold mill is a lure for Esmark, the largest buyer of cold-rolled product in North America.

Sparrows Point could also supply Esmark's Wheeling-Pitt with the 1.3 million tons of slab it consumes each year, Bouchard said.

A spokesman for Mittal did not respond yesterday to a call seeking comment.

Ultimately, the Justice Department must approve the buyer of Sparrows Point.

As of yesterday, Bouchard said he had not heard back from Mittal's investment bankers. But he said he is evaluating several other U.S. facilities that could possibly bolster Esmark's bid for Sparrows Point in the eyes of Mittal's bankers and the Justice Department.

"We are looking at service centers that would complement distribution for Sparrows Point," he said.

According to Mittal's contract with the plant's union, United Steelworkers Local 9477 has the right to bid first on the plant with the buyer of its choosing.

Mittal must consider the union's proposal first, as long as it is as good as or better than competing offers, said David R. McCall, head of the union's international Mittal Steel committee in Columbus, Ohio.

McCall and Bouchard said they are bound by a confidentiality agreement and could not discuss whether the union is formally supporting Esmark's bid or any other. McCall also declined to say whether the union has formally asked the Justice Department to reconsider its ruling.

Bradford, the New York steel analyst, once estimated Sparrows Point would sell for five times its annual operating profit.

Former general manager John Lefler said in a memo last March that the plant contributed $100 million in annual profit, though it is uncertain whether it was operating profit.

Sparrows Point employs fewer than 2,500 workers.

allison.connolly@baltsun.com

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