Arcelor Mittal''s Sparrows Point plant; Why it has to be sold


Mumbai: Arcelor Mittal, the world''s largest steel maker, has received clearance from US anti-trust authorities to sell its Sparrows Point steel mill for $1.35 billion.

The transaction is expected to close in October, subject to oversight and approval by the recently appointed court trustee, the company said in a statement.

Why Arcelor Mittal had to sell the Sparrows Point facility
Prior to Mittal''s acquisition of Arcelor (See: Mittal-Arcelor: Saga of a bidding war) , Mittal was one of the two large integrated steel producers who accounted for more than 74 per cent of all tin mill product sales in the eastern United States.

Prior to the merger, Canadian steel maker Dofasco Inc, which Arcelor acquired in a hostile takeover (See: ThyssenKrupp backs out, Arcelor wins Dofasco) the same week that Mittal announced its bid for the second largest steel maker, operated a large integrated mill in Ontario. Between them the two provided competition, which the US Department of Justice felt could be threatened and lead to a rise in prices once Mittal Steel had acquired Arcelor.

On 20 February, 2007, the department announced that it would require Mittal Steel to divest its Sparrows Point facility located near Baltimore, "to remedy the competitive harm arising from Mittal''s recent $33 billion acquisition of Arcelor S A." To pre empt such concerns in the US, Mittal had agreed to sell to Dofasco to German steel maker ThyssenKrupp, the company, which had proposed a merger with Dofasco before Aercelor grabbed it.

On 1 August, 2006, the department''s antitrust division filed a civil lawsuit in the US District Court in Washington, DC, to block Mittal''s proposed acquisition of Arcelor.

Along with a proposed consent decree for Mittal to divest a steel mill that supplied tin mill products to the eastern United States anticipating that it might be unable to sell Dofasco, which Mittal had agreed to sell to German steel maker ThyssenKrupp (See: Mittal''s bid revives Thyssen''s hopes for Dofasco) because Arcelor had, in an attempt to defeat Mittal''s hostile takeover bid, placed legal title to Dofasco into a Dutch foundation, the Strategic Steel Stichting.

Therefore, in the event the sale of Dofasco could not be carried out as required (See: Trust blocking sale of Dofasco, says Arcelor Mittal), the proposed consent decree gave the Department the right to select for divestiture either Mittal Steel''s Sparrows Point mill or its Weirton mill, located in Weirton, W.Va.

The Sparrows Point is a profitable and diversified facility that has the capacity to produce more than 500,000 tons of tin mill products annually. Sparrows Point currently operates as an integrated facility that produces the steel slabs used in the manufacture of tin mill products and, unlike the Weirton mill, would not have to develop new sources of supply for this critical input upon its separation from Mittal Steel.

"With the divestiture of Sparrows Point, competition in the market for tin mill products in the eastern United States will be preserved," said Thomas O. Barnett, assistant attorney general in charge of the department''s antitrust division.