Mittal Steel Co. starting over in quest to sell Sparrows Point steel

Daily Record, The (Baltimore), Dec 18, 2007 by Andy Rosen

Mittal Steel Co. NV will apparently have to start over in its quest to sell the Sparrows Point steel mill in Baltimore County.

A coalition of buyers called E2 Acquisition Corp. came up short in its financing for a $1.35 billion purchase of the plant, Mittal said late Sunday. Now, a court-appointed trustee will take over the search for a new buyer.

The company said the decision to terminate the deal came at the direction of that trustee, Attorney Joseph G. Krauss of the firm Hogan & Hartson LLP.

"No specific schedule has been established but the trustee's goal is to obtain a transaction with the earliest possible closing date," Mittal said in a statement. Officials did not respond to further questions.

Reached by e-mail, Krauss said he could not discuss the termination of the deal. "We are commencing our effort to find a buyer to complete the divestiture as quickly as possible, pursuant to the Divestiture Order," he wrote.

It has been nearly 10 months since the steelmaker was ordered to sell the plant as part of its merger with Arcelor SA. The U.S. Department of Justice directed the company to sell the plant -- as part of a consent decree -- in order to prevent a monopoly over the production of tin plate.

After several deadline extensions stretching into August, the company agreed to terms with E2, which is led by Esmark Inc. of Chicago Heights, Ill. The deal was originally expected to close by Nov. 30, but the negotiating period extended into last week.

During that time, Mittal continued to work with United Steelworkers, the union that represents Sparrows Point employees. The plant employs roughly 2,500. Because of previous agreements with plant owners, the union has a stake in decisions about future ownership.

It was unclear Monday whether E2 can get back in the running for the plant.

John Cirri, president of United Steelworkers Local 9477, was not available for interviews Monday but did issue a statement. On the union's Web site, Cirri wrote in a recent update that there was a dispute over retiree benefits.

He noted in that update that the benefits have to do with former employees, rather than current or future workers.

The union will continue to be an active player in the negotiations, according to a statement released by the United Steelworkers.

"Any new potential buyer should [understand] that the union will not reach agreement with them unless it provides the protections we demand," Cirri's statement reads. "Our union will continue to insert itself into this bidding and buying process. It bears repeating that the only acceptable bid will be one that requires long term profitability and viability for both the company and our members"

The Associated Press reported last week that some of Esmark's agreements with partner companies lapsed after Nov. 30, when the deal did not close. The original partners were Franklin Templeton Investments of San Mateo, Calif.; Industrial Union of Donbass Corp., a Ukrainian steel company; and Vale, a Brazilian mining company previously called Companhia Vale do Rio Doce, or CVRD, according to the AP. Esmark officials did not respond to requests for comment Monday.

When the Justice Department ordered the plant sold, it noted the strength of the facility. Of note were its deep water access for shipping, and its blast furnace that ranks among the nation's largest. The company's order to sell the plant called Sparrow's Point "profitable and diversified."

For those reasons, the Justice Department deemed Sparrows point a better candidate for sale than another plant in Weirton, W. Va.

The initial delay in finding a buyer likely resulted from the complexity of the deal it would take to make the numbers work for both the buyer and seller.

In its statement, Mittal said Krauss would retain an investment bank to help move the sale forward. The sale would remove a final obstacle to the completion of the company's merger with Arcelor, but it will continue to oversee the plant's day-to-day operations until it is sold.

In a statement, the Justice Department said it expects the deal to move forward.

"Other capable buyers are interested in acquiring this important asset, and the trustee appointed by the court will continue to have the authority to consummate a sale of the Sparrows Point mill to a buyer approved by the department."