Mittal Steel to sell Maryland mill to Esmark, Wheeling-Pittsburgh

Mittal Steel Co. NV said Thursday it will sell its Sparrows Point mill near Baltimore to a group led by privately held domestic steel distributor Esmark Inc. and Wheeling-Pittsburgh Steel Corp. for an undisclosed price to settle U.S. antitrust concerns.

The deal is subject to approval by the U.S. Justice Department, which ordered the Dutch steelmaker in February to sell Sparrows Point to preserve U.S. competition in production of tin-plated steel, used to make cans for food, aerosol sprays and paint.

Mittal said it would announce more details after receiving regulatory approval of the sale, which is expected to close by Oct. 31.

The deal's completion would clear the way for Mittal's planned $41 billion merger with Arcelor SA of Luxembourg, which will create the world's largest steelmaker. ArcelorMittal's holdings include the former Weirton Steel mill in West Virginia.

Mittal Chief Financial Officer Aditya Mittal said in a statement that Sparrows Point had been an important part of the company's U.S. operations.

"We greatly respect the uncertainty that the more than 3,000 employees at Sparrows Point have had to live with during this difficult period," he said.

The United Steelworkers, which represents about 2,300 of the mill's workers, didn't immediately respond to requests for comment on the deal.

Esmark, based in Chicago Heights, Ill., is run by brothers James P. and Craig T. Bouchard. Founded in 2003, it has grown by acquiring other steel companies and is in the process of buying Wheeling-Pittsburgh Corp., a West Virginia steelmaker it won in a proxy fight last fall.

Esmark Chairman James P. Bouchard said in a statement that Esmark and Wheeling-Pitt will jointly lead the acquisition group, to be called E2 Acquisition Corp.

Esmark President Craig Bouchard said the other investors include a European steelmaker and a South African company, but he didn't identify them.

Craig Bouchard will become chairman and chief executive of E2 after the deal closes, relinquishing his responsibilities with both Esmark and Wheeling-Pitt, Esmark said. E2 will be independently operated and managed, and will supply steel to both Esmark and Wheeling-Pittsburgh, Esmark said.

Craig Bouchard said E2 will take advantage of Sparrows Point's state-of-the-art facilities and ocean access while strengthening the mill's relationships with customers and the United Steelworkers.

"We will commit ourselves to provide low-cost North American slab, tin and flat-rolled products," he said.

He said Sparrows Point will start providing 60,000 tons of steel slab per month to Wheeling Pitt within 60 days after the deal closes.

"Our strategy at Sparrows Point will be to get quickly to full capacity as we become the most efficient slab producer in the United States," Craig Bouchard wrote in an e-mailed response. "We will build the tin business and make it a stronger competitor in the North American market as we lower our cost structure with higher volumes."

James Bouchard said Esmark has about 700 employees and annual revenues of $700 million. It buys 750,000 tons of steel annually and distributes about 700,000 tons through Wheeling Corrugated, a division of Wheeling-Pitt, he said.

Sparrows Point, formerly Bethlehem Steel, has stood on its site since 1887. Bethlehem Steel spent more than $600 million to build a cold mill and reline the blast furnace before filing for bankruptcy in 2001. The improvements helped make it one of the biggest and most efficient blast furnaces in North America.

It can make 3.9 million tons of raw steel every year for customers in construction, car making and appliance manufacturing. Located on the Chesapeake Bay, it is the only fully integrated U.S. steel mill with direct ocean access. It also has access to rail and highway shipping.