Point's sale is not yet certain

Mittal hasn't resolved union retiree issue

December 08, 2007|By Allison Connolly | Allison Connolly,Sun reporter

The sale of Sparrows Point is facing a Tuesday deadline -- the latest hurdle in the effort to complete the $1.35 billion deal.

Owner Mittal Steel Co. NV of the Netherlands was unable to meet a Nov. 30 target to sell the Baltimore County plant to global investment group E2 Acquisition Corp., which is led by Esmark Inc., of Chicago Heights, Ill.

The Justice Department ordered Mittal to sell Sparrows Point as part of a consent decree resolving antitrust issues arising from its merger with Arcelor SA of Luxembourg, creating the world's largest steelmaker.

Mittal has been unable to reach an agreement with the United Steelworkers over payment of retiree benefits, a condition stipulated in the labor contract that Mittal assumed when it bought the Sparrows Point plant in 2005, said Craig T. Bouchard, chairman and chief executive officer of E2.

His group is not responsible for benefits of workers who retired before a deal was reached with Mittal because it is an asset sale, he said yesterday.

The Steelworkers have the power to thwart a sale. David McCall, who represents Steelworkers in negotiations with Mittal over the benefits issue and the sale of the plant, did not respond to a request for comment.

If the parties fail to reach an agreement by Tuesday, Mittal would continue to operate the plant until the sale is completed. But a trustee appointed by a U.S. court to oversee the sale could seek a new buyer for the plant if he feels progress is too slow.

"Everybody is working hard over the weekend trying to resolve this by next week," Bouchard said yesterday.

The trustee, Joseph G. Krauss, a partner at Hogan & Hartson LLP in Washington, declined to comment.

The Justice Department, which approved Esmark as the buyer, also must sign off on the terms of the deal. Gina Talamona, a spokeswoman for the agency, said only, "The matter is still pending."

Because the deal was not completed by Nov. 30, Esmark's agreements with its partners have lapsed, Bouchard said.

The team includes Franklin Templeton Investments, Companhia Vale do Rio Doce, a Brazilian iron ore producer, and Industrial Union of Donbass Corp., a Ukrainian steel company. Esmark would have a minority stake in the plant but would be responsible for day-to-day operations.

Bouchard said his equity and debt investors remain committed to the deal, which he said was noteworthy given that the credit market has essentially dried up due to the fallout over subprime-backed securities. He said the Brazilian and Ukrainian companies also are still on board but left open the possibility that new partners could be added.

Platts, a Chicago trade publication that covers the energy and metals industries, first reported the new deadline Thursday.

John Cirri, head of United Steelworkers Local 9477, which represents production and maintenance workers at the plant, did not return calls seeking comment.

If the deal is approved, E2 plans to rename the plant Maryland Steel Sparrows Point Corp., named after the first company to pour pig iron on the site, Maryland Steel.

Sparrows Point would be one of two hubs of steel production for Esmark, which was founded in 2003 by Bouchard and his brother James as a steel distributor.

Last month, shareholders of Wheeling-Pittsburgh Corp. approved its sale to Esmark. The Bouchards plan to increase steel production at Sparrows Point and supply 850,000 tons of slab to Wheeling-Pitt each year.


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