Morgan Stanley Steps Up to the Plate to Handle Sale of Sparrows Point Steel Mill

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Researched by Industrial Info Resources (Sugar Land, Texas)--Mittal Steel USA, a subsidiary of Arcelor-Mittal (NYSE:MT) (Luxembourg City, Luxembourg), canceled the agreement it had to sell its Sparrows Point, Maryland, steel mill to the E2 Acquisition Corporation at the direction of a court-appointed trustee who was overseeing the sale. E2 Acquisition Corporation, a global investment firm, was a joint venture sponsored by Chicago Heights, Illinois-based Esmark Incorporated and Wheeling-Pittsburgh Corporation. The purchase price was confirmed at $1.35 billion. The transaction was expected to close at the earliest possible date and was subject to oversight and approval by Joseph G. Krauss, a partner at the Washington, D.C., law firm Hogan & Hartson LLP, the appointed court trustee. E2 Acquisition was unable to secure the necessary financing in the agreed amount of time. The original deal between ArcelorMittal and E2 was announced last August, and it was expected to close November 30, 2007. That date was extended to December 11, 2007, and it also was not met. Esmark has said that it was preparing another bid for the plant with partners whose names have not yet been released.

The court-appointed trustee recently announced that the investment bank, Morgan Stanley (NYSE:MS) (New York, New York) will now manage the sale. Morgan Stanley has already begun the process of soliciting bids from prospective buyers of the plant. ArcelorMittal is under a Justice Department order to sell Sparrows Point to settle antitrust issues from the merger of Arcelor & the Mittal Steel Company.

See related February 27, 2007, article - No Sparing Sparrows Point, Mittal Must Sell to Settle Antitrust Issue.

In the meantime, ArcelorMittal will continue to operate the plant, which employs more than 2,500 and can make up to 3.9 million tons of raw steel a year. Sparrows Point is an integrated steel-making facility. Located on the Chesapeake Bay, it has direct ocean access as well as the use of rail and highway shipping. Sparrows Point is the former Bethlehem Steel plant and has stood on its site since 1887.

An integrated steel mill has all the functions for primary steel production:

•Iron making (conversion of ore to liquid iron)
•Steelmaking (conversion of pig iron to liquid steel)
•Casting (solidification of the liquid steel)
•Roughing rolling/billet rolling (reducing size of blocks)
•Product rolling (finished shapes)

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