ArcelorMittal to sell Piombino steel mill to Arvedi to help clear Ilva deal

ArcelorMittal has reached a preliminary agreement to sell its steel mill in Piombino, Italy to Italian steelmaker Arvedi to help get clearance from EU authorities for its purchase of Ilva, Europe's largest steel plant.

ArcelorMittal, the world's top steelmaker, reached a 1.8-billion-euro ($2.1 billion) deal to buy Ilva, in southern Italy, in June but the purchase has since stalled thanks to legal challenges and an EU anti-trust investigation.

Two sources familiar with the matter told Reuters the deal was struck this week, and that ArcelorMittal was moved to dispose of Piombino due to EU concerns over market concentration in the galvanised steel sector.

The sources did not provide any other details. ArcelorMittal and Arvedi declined to comment.

Galvanised steel is used in the autos, white goods and construction sectors. The Piombino mills make 800,000 tonnes per year of the product.

EU antitrust authorities in November upgraded their investigation into ArcelorMittal's proposed takeover of Ilva, fearing it will lead to steel price hikes. European steel prices are up some 85 percent since Jan. 1 2016.

A few weeks after the anti-trust filing, the Puglia and Taranto regions of Italy filed an appeal against the Italian government's approval of ArcelorMittal's environmental plan for Ilva.

Italian Prime Minister Paolo Gentiloni wrote to the governor of Puglia and mayor of Taranto on Friday, urging them to drop a lawsuit that could scupper the deal and sink the planned clean-up operation for Ilva.

"I ask you to withdraw your suit from the regional courts and not imperil the environmental clean-up," Gentiloni said. The Puglia governor, Michele Emiliano, said he would be happy to meet the prime minister but declined to drop the lawsuit.

ArcelorMittal's proposed takeover of Ilva comes as steel majors Tata Steel and Thyssenkrupp are looking to combine their European assets, meaning anti-trust authorities are on high alert.

To allay their concerns, Italy's state holding company CDP and Intesa Sanpaolo have signed a non-binding agreement to join ArcelorMittal's bid for Ilva, replacing former bid partner Marcegaglia, an Italian steel processing firm.

The Ilva plant has been dogged by charges of corruption and environmental crime for years. In 2012, Italian authorities ruled emissions from the plant had caused deaths, tumours and respiratory diseases. About half the plant's annual 11 million tonne capacity was eventually mothballed.