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Esmark Agrees to Merge with Essar Steel

05/01/2008 - Esmark agrees to the material terms of a proposed tender offer and merger with Essar Steel Holdings Limited for a cash purchase price of $17.00 per share.

Esmark Inc. has agreed to the material terms of a proposed tender offer and merger with Essar Steel Holdings Limited for a cash purchase price of $17.00 per share.

Esmark has also entered into a binding commitment letter with Essar for a $110 million term loan that should be funded by the middle of May.
 
The company plans to use proceeds of the loan to refinance the existing term loan and provide additional liquidity.

The company plans to enter into definitive documentation upon expiration or waiver of the approximate 52-day "right to bid" period defined in its collective bargaining agreement with the United Steelworkers.
 
Within ten days of entering into definitive documentation, a wholly-owned subsidiary of Essar will accomplish the two-step acquisition by means of a front-end, cash tender offer for all of the outstanding shares of Esmark's common stock, at $17.00 per share in cash. If greater than 50% of the outstanding shares are tendered, then a second-step, cash-out merger would follow in which all remaining shares of Esmark common stock will be converted into the right to receive $17.00.
 
"The proposed merger with Essar is the culmination of an extensive review of the strategic options available to the company that included exploratory discussions with a number of potential partners,” said James P. Bouchard, Esmark’s Chairman and CEO. “I am grateful to the employees of Esmark and Wheeling-Pittsburgh, our shareholders as well as the United Steelworkers for their continued belief in our company,” added Bouchard, “and I am proud that the Esmark family will be joining a great company like Essar.”
 
Madhu S. Vuppuluri, President Essar Americas, said "Essar is very excited about the potential merger with a great company located in the steel capital of the United States. We plan to make significant investments into Wheeling-Pittsburgh Steel to make it a low cost, technologically advanced steel producer. We look forward to a strong relationship with the United Steelworkers, our employees as well as the local communities."
 
Esmark has also entered into a binding commitment letter with Essar for a $110 million term loan that should be funded by the middle of May. The company plans to use proceeds of the loan to refinance the existing term loan and provide additional liquidity.
 
“With spiraling raw material and transportation costs, difficulty securing long-term financing commitments and the investment challenges associated with maximizing steel production capacity, we were convinced that a strategic partner like Essar was the best possible solution for the long-term prospects of the company moving forward,” commented Bouchard.
 
The tender offer, which was unanimously accepted by Esmark's Board of Directors, is subject to certain conditions, including the valid tender in the offer of a majority of the fully diluted Esmark common stock, and other customary conditions as well as the approval by the Department of Justice and Committee on Foreign Investment in the United States.