United Steelworkers Approve Renco Group As Choice Buyer For Sparrows Point

Sophia Fain 9:59AM, January 26, 2011

"John Cirri, president of Sparrows Point Local 9477, has confirmed a previous report in The Brew that Renco Group, controlled by New York financier Ira Rennert, is the choice of the United Steelworkers (USW) to buy Sparrows Point," according to the Baltimore Brew.

The report said "Sources who attended a union meeting last night quoted Cirri as saying that the USW had reached a basic labor contract with Renco and that Renco is negotiating with Severstal to reach terms for the purchase of Sparrows Point and two other Severstal mills at Warren, Ohio, and Wheeling, WVa.

But there is no guarantee that Severstal will sell the properties to Renco.

'Things could get ugly' as negotiations among Renco, Severstal and chief USW negotiator David McCall continue, sources said.

One potential source of dispute is Renco’s offer price. Its initial price, among several submitted to Severstal last fall, had angered CEO and majority owner, Alexei Mordashov, who called the bids “embarrassing.” It is not known whether Renco has modified its bid...

The USW rejected Optima’s bid, Cirri said last night, because it wanted to “slash” wages and benefits and was not interested in a long-term raw materials contract. Renco Group reportedly agreed to keep wages and benefits in line with the USW’s national “pattern” contract.

Options for Sparrows Point

The next step is for Severstal and Renco to reach a purchase agreement. This may be quickly concluded or may drag out for weeks.

Severstal has several other options. They could push forward with a sale to Optima or another group of buyers not sanctioned by the USW, pull back from a sale of the mills altogether, or place one or more of the facilities into voluntary bankruptcy.

Sparrows Point is organized as Severstal Sparrows Point LLC, a private company with reported annual sales of $1.4 billion and 2,300 employees.

The mill is barely operating at present, with its blast furnace closed and only one of its finishing mills, the tinplate mill, in active operation."

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Comments

Mordashov was embaressed and angry at the offer by renco........the russian bought the mills complete with an order book but now wants to recoup his money by selling without an order book. Must be the russian way.

joe carmella January 26, 2011 at 3:09PM

Let's see.....steel mills bought complete with order books. Order books diverted to Mississippi and Michigan mills. Now mordashov angered and embarassed by offer price. What is wrong with this picture.

joe carmella January 26, 2011 at 3:10PM

Wow. Alexei has offers from Renco (who owned WCI the last time it went bankrupt) and Optima of Miami (the guys who have been jacking around with the old Copperweld plant in Warren for the past 5 years). I hope for the workers' sake there is a door number three. The USWA is a real hoot. When Wheeling-Pitt was up for sale in 2006, the USWA acted as "king maker" and endorsed Esmark over CSN of Brazil. Esmark then proceeded to nearly bankrupt Wheeling-Pitt for the third time. At the same time that every other steel company in the USA was making money hand over fist. So then the USWA started carping about Esmark; Essar Steel (of India) put in a bid and the USWA blackballed that, singing the praises of Severstal, who was on a junkyard buying binge in 2008 under the shrewd leadership of Mordashov and Gregory Mason. Now the USWA sees Severstal as bums too, and is endorsing Renco over Optima. The only common elements in all of this are (a) bankruptcies, (b) shuttered plants, and (c) the USWA. Lather-rinse-repeat.

Steel Man January 29, 2011 at 10:55PM

Steel Man: You nailed it!!!!!! The Indians would have paid $1.5B in 2007 but Mittal wanted to sell to a weak sister (Esmark) for $1.35B that Esmark didn't have. When that deal collapsed, Mittal had to settle for the $810M for Sparrows Point that Mordashov was willing to pay. Unfortunately for Mordashov, he later discovered all the albatrosses hanging around Sparrows Point's neck. I don't think anybody will ever be able to turn that plant into a profitable operation with the raw material, energy and labor issues that plague the place.

John Doe January 31, 2011 at 2:14PM

While the "Point" has issues we have always produced a quality product.After being mismanged by Bethlehem for decades,Wilbur Ross bought us and we made money.Mittal bought us and came in and ran us as a swing mill taking prime orders from our order books to fill their other mills books.Severstal comes in doesnt lock in raw material contracts instead buying on the spot market then crys about raw material cost.Oh and they take whats left of our order book to the Mississippi and Michigan mills.As to your labor issues statement we have bent over backwards to do what it takes to make the needed changes in work practices,job combinations.So while we wait to see who is next to buy the "Point"one thing that hasnt changed is a workforce of skilled and dedicated men and women who when given the tools can compete with anyone.While i will not shed a tear as you seem to be for Mr Mordashov purchase.He seems to be doing quite well.Most of the problems that plague the "Point" are problems of mismanagement dating back decades.