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Italy's government said Thursday it has started formal proceedings to place the former Ilva steel company, Europe's largest steelworks, under special administration to keep it afloat, after failing to reach agreement with majority owner ArcelorMittal (NYSE:MT) on the factory's future.
The decision follows a standoff between the government led by Prime Minister Giorgia Meloni and the company over the injection of €320M in fresh capital needed to keep the plant running.
The plant in Taranto has long been weighed by environmental problems and struggled to stay afloat, with production dropping to less than 3M metric tons last year, compared with its capacity of 8M tons.
Earlier this week, a court ruled that gas company Snam (OTCPK:SNMRF) (OTCPK:SNMRY) could stop supplying energy to the steelworks due to ~€200M in unpaid bills.
With the plant under special administration - similar to Chapter 11 bankruptcy in the U.S. - the government will be able to appoint its own interim executive to take over management from ArcelorMittal (MT) while it seeks a buyer.
ArcelorMittal (MT) could launch a legal appeal against the decision; Financial Times reported the company has offered to exit the business altogether, but wants compensation of €200M for its shares and an additional €200M for supplies provided to the factory.