Investor: Weirton still up for grabs

Investor: Weirton still up for grabs

	Published : Fri, 19 Jan 2007 22:33 By : Agencies Print this Story

MORGANTOWN, W.Va. (AFX) - Mittal Steel Co.'s plan to sell parts of its West Virginia operation to Esmark Inc. is 'completely meaningless,' another potential buyer says, because it ignores two parties that could reject the plan.

New York investor Mitchell Hecht said Friday that the Independent Steelworkers Union in Weirton and the U.S. Department of Justice could derail the tentative deal, which Esmark said includes the hot roll, cold roll, coated and tin assets of the former Weirton Steel Corp.

'I view the announcement yesterday as completely meaningless,' said Hecht, who worked for Ohio-based International Steel Group Inc. before it was absorbed by Mittal. 'I think there's an attempt here to create a fait accompli.'

Mittal, however, denied that and acknowledged there are many contingencies to its potential deal with Esmark, the 4-year-old and rapidly expanding steel distribution company that seized control of Wheeling-Pittsburgh Corp. last fall.

'Esmark's strategy is focused on changing the dynamics of the steel supply chain. This is one more critical step for us,' said Chairman and CEO James Bouchard, who aims to complete a purchase agreement by Feb. 2.

The union at Weirton, however, can reject a change in ownership under a successorship clause in its contract, and Justice Department officials are still reviewing antitrust issues in Mittal's merger with Arcelor SA of Luxembourg.

Justice ordered Netherlands-based Mittal to try to sell Dofasco Inc. of Canada by Jan. 28 before it will consider allowing the sale of two U.S. assets, Weirton or Sparrow's Point in Maryland.

The Dutch trust that controls Dofasco rejected a plan to sell it to ThyssenKrupp AG of Germany.

Mittal executive Lou Schorsch said the nonbinding agreement with Esmark 'allows us to prepare for a swift execution of the disposal of the Weirton assets in case Dofasco cannot be sold and the Department of Justice asks us to sell these operations.'

Hecht, however, said DOJ still must determine Mittal made adequate efforts to divest.

'To announce that you already have a signed deal with a buyer before the 28th completely contradicts the consent decree signed and is really kind of odd,' he said.

Union President Mark Glyptis said he also was baffled by word of a deal with Esmark, with whom he's had limited contact.

'The DOJ has been very open with us. We understand how they operate,' he said. 'They are going to set the tone. It's not going to be Mittal. It's not going to be the ISU. It's not going to be anyone else. They are going to control the process, and I'm determined to give DOJ the respect they deserve.'

Still, the union is eager for change.

After years of struggling, Weirton Steel filed for Chapter 11 bankruptcy in May 2003 and was sold twice in 18 months, first to International Steel Group, then to Mittal. No raw steel has been made since 2005, and the mills that once employed 13,000 people now employ just 1,250.

Glyptis had plans to make Weirton more competitive, but Mittal shut down the blast furnace and cut 800 jobs without giving the union a chance.

'Pieces of our mill are world-class. Others are average. But that's true of any mill in this country,' Glyptis said. 'This company can make money and will make money.'

Hecht said he will meet next week with the Justice Department to discuss his plans, which include the restart of at least one blast furnace, the rehiring of several hundred workers and the investment of hundreds of million dollars.

He wants to employ cutting-edge, pollution-control techniques, including a replacement for coke, a coal-derived fuel that contributes to greenhouse gases. That could also reduce production costs, but Hecht declined to reveal details, citing the proprietary nature of a technology not yet used in the United States.

Though Weirton's production costs are slightly higher than some other producers, Hecht said the difference is incremental.

'Weirton Steel is absolutely, in this market, an economically viable company,' he said. 'It can stand on its own as an independent competitor. Why? Because the steel industry has changed in the past five years.'

With global consolidation, supply and demand are better balanced, and labor has been restructured. 'Now, you have a very, very profitable plant -- if you are making steel,' he said.

Hecht said the Justice Department should aim to create a self-sustaining competitor rather than supporting parties that 'are interested only in constraining supply and keeping Weirton down.'

'At the end of the day, I'm pretty confident that fair-minded people will rise to the occasion and we'll be allowed to make this investment and bring back those jobs,' he said.