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STEEL

ArcelorMittal bids for scandal-hit steel plant

ArcelorMittal has teamed up with Italy's Marcegaglia to bid for Ilva, a loss-making Italian steel plant at the centre of a major environmental scandal, the target company confirmed on Wednesday.

ArcelorMittal bids for scandal-hit steel plant
Ilva factory workers protest outside the plant in 2012. Photo: Donato Fasano/AFP

The Ilva site at Taranto in the Puglia region of southern Italy employs 16,000 workers and has the biggest output capacity of any plant in Europe.

It is currently operating at roughly half of its peak production level of 11 million tonnes per year because of weak demand and chronic overcapacity in Europe.

The plant has been under special government administration since last year after its owners, the Riva family, were accused of failing to prevent toxic emissions including carcinogenic particles from spewing out across the town, contaminating local farm land and mussel beds off the coast.

A report published by the European Environment Agency on Tuesday named Ilva as one of the 30 worst industrial plants for pollution in Europe.

The European Commission last month gave Italy two months to outline how it intends to clean up the plant, which supplies steel products to the car and engineering industries and is vital to the blighted economy of southern Italy.

Ilva confirmed on Tuesday that it had received a bid but refused to divulge details. Sources said the offer from Luxemburg-based ArcelorMittal and Marcegaglia was a non-binding one and subject to a series of conditions, including a 30-day deadline for acceptance.

The time-limited move by Arcelor boss Lakshmi Mittal ups the pressure on other potential bidders, said to include another Italian group, Arvedi, to come forward.

JSW loses out?

Italian media have made ArcelorMittal the favourite to win any bidding war. Indian steelmaker JSW also expressed initial interest in Ilva but, according to reports in India, the company has been put off by the potentially high environmental and pension liabilities associated with the plant.

The cost of making Ilva compliant with the European Union's Industrial Emissions Directive has been estimated at €1.8 billion and who picks up that bill will be central to the takeover negotiations.

Several members of the Riva family and other Ilva managers were convicted between 2001 and 2007 on pollution-related charges but many of these were subsequently quashed on appeal under statute of limitations rules.

Prosecutors in the various cases cited a local lung cancer rate running at 30 percent above the Italian average and blamed the plant for 400 premature deaths in the 1990s and first decade of this century.

Italian Prime Minister Matteo Renzi is desperate to secure some kind of future for Ilva against a gloomy economic backdrop of a contracting economy and stubbornly high unemployment – both of which are frustrating his attempts to put the nation's finances in order. He has said he wants a solution by Christmas.

The problem of what to do about Ilva is the most acute element of a broader crisis in what is the second largest steel industry in Europe, after Germany's.

Italy's second biggest company in the sector, Lucchini, is also under special government administration pending a resolution of its future, which might come soon.

JSW was among potential bidders looking at acquiring part of Lucchini's Piombino plant in Tuscany. The Indian company appeared on Wednesday to have lost out to Algeria's Cevital, after a committee established by the administrator recommended its bid.

No deal has been signed however and labour unions were seeking clarification of the terms of the deal from the ministry for economic development.

A third Italian steel group, Acciai Speciali Terni (AST), is in the throes of a battle between management and unions over German owner ThyssenKrupp's desire to cut 550 jobs as part of a restructuring it says is vital to secure the plant's future.

Pope Francis is among those who has weighed into the row with the pontiff having publicly backed the AST unions' case against job cuts in September.

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STEEL

EU opens probe into ArcelorMittal purchase of Ilva

European Union anti-trust authorities have opened an investigation into global steel giant ArcelorMittal's bid to buy struggling Italian steel producer Ilva, officials said on Wednesday.

EU opens probe into ArcelorMittal purchase of Ilva
Ilva's Taranto site in southern Italy is at the centre of a huge legal case over toxic emissions. Photo: Alfonso Di Vincenzo/AFP

The €1.8 billion ($1.9-billion) deal would see ArcelorMittal join forces with Italy's Marcegaglia to snap up the heavily indebted company, which employs 14,000 people.

“The European Commission has opened an in-depth investigation to assess the proposed acquisition of Ilva by ArcelorMittal under the EU merger regulation,” said the commission, the executive of the 28-nation EU.

“The Commission has concerns that the merger may reduce competition for a number of flat carbon steel products,” the commission said in a statement.

The Commission now has until 23rd March 2018 to decide on whether competition rules would be violated and approve or reject the proposed merger.

The EU's anti-trust commissioner Margrethe Vestager said European industries dependent on steel employ 30 million people and need to buy the material at competitive prices to compete globally.

“This is why we will carefully investigate the impact of ArcelorMittal's plans to buy Ilva on effective competition in steel markets,” Vestager said in the statement.

ArcelorMittal has pledged to keep at least 10,000 employees “for the entire duration of the industrial plan” following negotiations with unions.

After news first leaked of the takeover, hundreds of employees at Ilva's site in the northwestern city of Genoa staged a protest in June.

Ilva's Taranto site in southern Italy is at the centre of a huge legal case in which experts cited by prosecutors have charged that 11,550 people have died from toxic emissions in seven years.

Italian bank Intesa Sanpaolo has planned to join the consortium before the deal is closed.

The offer includes plans to invest €2.4 billion in Ilva, with funds earmarked for upgrading industrial equipment and improving environmental standards.

ArcelorMittal has said Ilva would be an important strategic acquisition, offering a significant presence in a country where it has no primary steelmaking capacity.