Point deal target missed

Talks continue on steel plant as 2nd deadline passes

December 12, 2007|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN REPORTER

A deadline to complete the sale of Sparrows Point came and went this week, further dragging out a resolution of the Baltimore County steel plant's fate.

Mittal Steel Co. NV of the Netherlands is under orders by the Justice Department to sell Sparrows Point to resolve antitrust issues related to its merger with Luxembourg-based Arcelor SA. Investment group E2 Acquisition Corp., led by Esmark Inc. of Illinois, agreed in August to buy the plant for $1.35 billion -- and the two parties have been trying to seal the deal ever since.

Their first target was Nov. 30. They agreed to extend the deadline to midnight Monday. Yesterday, ArcelorMittal spokesman Bill Steers said the deadline was self-imposed, not mandated by the Justice Department, and negotiations were continuing.

"All the parties involved are actively working hard to get this done," Steers said.

Esmark did not return calls for comment yesterday. Neither did the trustee appointed by a U.S. court to oversee the sale, who could look for other buyers if he thinks progress is too slow.

"The trustee continues to work to ensure the sale of Sparrows Point as soon as possible," said Gina Talamona, a spokeswoman for the Justice Department. "All I can tell you is it's pending."

In the meantime, the plant's nearly 2,500 employees are in the dark.

"Have you heard anything? Because we haven't," said John Cirri, president of United Steelworkers Local 9477. which represents production and maintenance workers at Sparrows Point.

"Until they tell me the details, I don't know what to assume. ... Esmark has not been communicating with me very well in this whole process," Cirri said.

Retirement benefits appear to be a key reason for the delay.

Esmark President Craig T. Bouchard, who is also chairman and chief executive of E2, said last week that Mittal has not been able to reach a deal with the United Steelworkers about payment of retiree benefits -- a significant issue because the union could stop the sale.

Because the deal now on the table is an asset sale, Bouchard said, E2 would not have to pay benefits to workers who retired before the deal was struck in August.

But ArcelorMittal said this week that it "has met all necessary conditions for closing the transaction" -- other than those that always have to be handled during the closing itself.

Cirri said the Steelworkers are concerned about the benefits and have been trying to negotiate a settlement, but he said he is not directly involved.

Another potential complicating issue is financing.

Thanks to market turmoil caused by rising defaults on subprime mortgages for homes, it is harder to get loans for big commercial deals than it was when the two parties were hammering out a price over the summer.

"It's just made things a little bit more challenging," said Christopher Plummer, managing director of Metal Strategies Inc., a management consulting firm for the steel and metal industries.

"It's certainly not prohibitive," Plummer said.

In addition to Esmark, the E2 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's agreements with its partners have lapsed because the deal was not finished by Nov. 30. But Bouchard said last week that all are still on board.

If the companies reach an agreement to finish the sale, it is subject to approval by the Justice Department.

"There are a lot of players in this," said Gary Hubbard, a spokesman for the Steelworkers union. "It's a very fluid situation."

jamie.smith.hopkins@baltsun.com

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