Severstal talks to Mittal Steel for acquiring its US plant
24 Nov 2006
Russian billionaire Alexei Mordashov's steel company Severstal, which lost out in a battle with Mittal Steel for the control of the world's second largest steel maker, Arcelor SA, in June this year is now negotiating with Mittal Steel to buy its US company Weirton Steel Corp.
Weirton Steel is the eight-largest steel maker in the United States and the country's second-largest producer of tin-plated steel products. According to a report by Russian paper Kommersant, Mittal Steel could be obliged to sell its Weirton Steel as required by the US Department of Justice's anti-monopoly regulations.
Mittal Steel had earlier proposed selling Canadian steel maker Dofasco, which Arcelor had acquired barely a week before it became Mittal's quarry. However, in a bid to dilute its attractiveness to Mittal Steel, the board of Arcelor placed control of Dofasco under a Dutch trust, The Steel Stitching Company.
Mittal Steel had originally planned to shed of Dofasco from the Arclor Mittal fold to satisfy anti-monopoly regulations by selling it to ThyssenKrupp of Germany. (See: Mittal's bid revives Thyssen's hopes for Dofasco)
However, the Dutch foundation has decided not to relinquish it's hold over the company. This could stall the sale of Dofasco to the combined Arcelor Mittal. (See: Trust blocking sale of Dofasco, says Arcelor Mittal) Under Arcelor's existing rules, only the board of The Strategic Steel Stitching, which governs Dofasco, has the power to approve a sale and the board can only transfer Dofasco back to Arcelor. It's not vested with the power to sell the company to a third party directly.
US justice department had said in May this year that the combined Mittal Arcelor could hurt competition in the Eastern US. With the propects of selling dofasco being stymied Mittal Steel has been contemplating relinquishing control over its West Virginia-based Weirton Steel or its Sparrows Point plant in Maryland.
Since losing out to Mittal Steel in the war for Arcelor, Severstal has raised just over $1 billion by placing shares in global depositary receipts in London this month. According to Mordashov, Severstal plans to utilise this money to fund the acquisition of more assets in a bid to emerge the world's second-largest steel maker overtaking Nippon Steel.
