Russian Firm Buys Sparrows Point Plant
Deal Is Smaller Than Earlier Offer
Industry analysts say the Sparrows Point plant will require significant investments in coming years.
(By Lucian Perkins -- The Washington Post)
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Saturday, March 22, 2008
A Russian steelmaker announced yesterday that it would buy the Sparrows Point steel mill southeast of Baltimore for $810 million in cash, fulfilling an antitrust mandate that Arcelor Mittal divest itself of the plant.
The deal is substantially smaller than one that fell apart in December.
The purchase will place Severstal, Russia's largest steelmaker, run by billionaire Alexei Mordashov, among the five largest U.S. steel producers. Sparrows Point is the only integrated flat-rolled steel plant on the East Coast and is the only such plant with its own deepwater port. It is well-positioned between Severstal's facilities in Dearborn, Mich., and a plant under construction in Columbus, Miss., both of which serve the automotive industry.
Sparrows Point has a capacity of 3.6 million metric tons of crude steel and shipped 2.3 million metric tons of finished steel products in 2007, according to Severstal.
"We are broadening our presence in products and markets," said Thomas M. Veraszto, Severstal's senior vice president of corporate development, who is based in Moscow. "It is highly complementary to our existing presence in the U.S."
Mittal Steel, owned by Indian billionaire Lakshmi Mittal, merged with Luxembourg-based Arcelor in 2006 to form Arcelor Mittal, the world's biggest steel company. It agreed to relinquish the Baltimore plant to resolve Justice Department antitrust concerns.
A $1.35 billion sale to a team of three companies led by Esmark, a steel distributor based in Chicago, collapsed in December when the companies failed to secure financing.
"We actually did not take a look in the first round because we expected it to be very expensive," Veraszto said in a telephone interview. "When it fell apart, we thought this . . . is a good opportunity to get this asset at a lower price than before. It's a huge advantage."
The sale is expected to close during the second quarter, said Bill Steers, the North American spokesman for Arcelor Mittal, which is based in Luxembourg.
Severstal will keep the management of Sparrows Point intact and continue to employ the plant's 2,300 workers, Veraszto said.
The company also agreed to enter a collective-bargaining agreement with the steelworkers union.
"This gives them a relationship with United Steelworkers that they didn't have before," said steel analyst Michelle Applebaum of Applebaum Research. "If you're going to be in the steel business in the United States, chances are you need a good relationship with United Steelworkers."
