Chicago-based Esmark Inc., part of the joint venture that wants to buy Sparrows Point steel mill, said yesterday that the deal remains on track despite the continuing financial troubles of Wheeling-Pittsburgh Steel Co., which it controls, and news that a federal judge has appointed a trustee to oversee the sale.
James Bouchard, chairman and chief executive of both Esmark and Wheeling-Pitt, made the comments after Wheeling-Pitt reported that it had lost $41.6 million in the second quarter and was facing a cash shortage.
Esmark, which took control of Wheeling-Pitt in a proxy fight last year, is trying to buy the company and make it part of the joint venture taking over Sparrows Point.
Bouchard said the merger with Esmark later this year will resolve much of Wheeling-Pitt's cash problems and leave it positioned to buy up to 800,000 tons of slab from Sparrows Point once the sale goes through.
Wheeling-Pitt's outside accountants questioned whether the company could continue as a going concern, according to a Securities and Exchange Commission filing. Bouchard, however, said the company is not in danger.
"Sparrows Point will become a very important partner with Wheeling-Pitt," he said. "Wheeling-Pitt is not in any jeopardy."
The earnings reports came on the same day Justice Department officials disclosed that a federal judge had appointed a partner in a Washington law firm as trustee to oversee the Sparrows Point sale.
The appointment was triggered when Luxembourg-based ArcelorMittal missed a Monday deadline to complete the sale in accordance with a Justice Department order.
Selling Sparrows Point is the last major obstacle to Mittal's completing its planned acquisition of Arcelor SA. Antitrust officials feared a merger that included Sparrows Point would give Mittal too much control over the tin-plate steel market in the United States.
ArcelorMittal, the world's largest steelmaker, said the trustee appointment was expected and is unlikely to affect the plant's sale, which is expected to close in 60 days.
"We will continue to work closely with the [Justice Department] and the trustee until the deal is completed," said Bill Steers, a Mittal spokesman, in an e-mailed statement.
It will be up to Joseph G. Krauss, an antitrust expert and former Federal Trade Commission attorney, to make sure Mittal follows through with the sale in a timely manner, according to an order filed Wednesday in the U.S. District Court for the District of Columbia. The sale must be approved by the Justice Department, which has 35 days to render a decision.
Esmark was among 14 companies that initially expressed interest in buying the Baltimore County plant, which employs 2,450 salaried and hourly workers.
The appointment of a trustee is rare in cases when the Justice Department orders a divestiture to address antitrust concerns. Typically, the parties complete a deal before the government's deadline. But in cases when one is appointed, a trustee's job usually is to find a buyer and oversee a timely sale. In this case, a buyer has already been identified, which means Krauss will have little more than a caretaker's role in the process, antitrust experts said.
The buyers of Sparrows Point said they plan to expand slab production at the plant, primarily to feed Wheeling-Pitt's production line. In addition to Esmark and Wheeling-Pitt, the partners in the venture include Companhia Vale do Rio Doce, a Brazilian iron ore and metals producer, and Industrial Union of Donbass Corp., a Ukrainian steel company.
The sale price has been estimated at about $1.35 billion.
"We are working very cooperatively with the [Justice Department] to assure them that our business plan is excellent," said Craig Bouchard, James' brother and a co-founder of Esmark. He will head the joint venture buying Sparrows Point.
"We will become a tough competitor in the tin, and we will invest in Sparrows Point," he said.