May 13, 2008
Mittal sues over Point
Damages sought for aborted sale of plant to Esmark
Workers move a slab in the hot mill at Sparrows Point, which has been sold to OAO Severstal of Russia. (Sun photo by André F. Chung / March 21, 2008)
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NEW YORK - ArcelorMittal, the world's biggest steelmaker, is suing Esmark Inc. for failing to complete a $1.35 billion purchase of the Sparrows Point steel plant. Mittal is seeking more than $540 million in damages in New York state court.
ArcelorMittal's agreement with a joint venture headed by Esmark, a Chicago-based metals distributor, was canceled in December after the buyer failed to secure financing.
ArcelorMittal, based in Luxembourg, sold the plant to Russian steelmaker OAO Severstal for $810 million in a sale overseen by a court-appointed trustee. The sale closed Wednesday.
Esmark "deliberately concealed" problems it was having in getting the necessary financing, ArcelorMittal said in court papers filed yesterday. It found out about the problem from a third party, according to the complaint.
Esmark spokesman Dennis Halpin declined to comment. Esmark last week announced it had a cash buyout offer valued at about $699 million from India's Essar Steel Holdings Ltd.
Esmark, which supplies steel to about 2,000 customers, had wanted to buy production assets to guarantee shipments to its most important customers. Esmark, which has bought about 10 companies in the past three years, beat out Brazil's Cia. Siderurgica Nacional SA and other companies to win the bid for the Sparrows Point mill in August.
The Baltimore County plant has deep-water access and can produce 3.6 million tons of steel a year. It employs 2,500 people.
Esmark "represented that it had the means to fund the transaction and pay the agreed-upon purchase price," ArcelorMittal said in the complaint. It accused Esmark of breach of contract and tortious interference. Arcelor said damages will be determined at trial, although they exceed $540 million, the difference between what Esmark promised to pay and what Mittal eventually received from Severstal.
The Justice Department had ordered ArcelorMittal to sell Sparrows Point because of antitrust concerns over the production of tin plate, which is used to make tin cans among other things. The government advised ArcelorMittal to terminate the sales agreement after Esmark missed several deadlines to close the deal.
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