Essar Global Limited and Algoma Steel Inc. have signed a definitive arrangement agreement providing for Essar’s acquisition of all Algoma common shares for Cdn$56.00 per share, or an aggregate equity value of $1.85 billion, payable in cash. Essar Global will conduct the deal through its wholly owned subsidiary, Essar Steel Holdings Limited.

The offer price represents a 48% premium to Algoma's volume weighted average stock price for the 20-day period ending on February 14, 2007, the date on which Algoma confirmed that it was in discussions regarding a potential transaction.

Under terms of the agreement, Algoma will undertake a court-approved plan of arrangement pursuant to which an Essar subsidiary will acquire all Algoma shares in consideration for Cdn$56.00 in cash per share. The arrangement must be approved by Algoma's shareholders by the affirmative vote of at least 66.33% of the votes cast (in person or by proxy) at a shareholders meeting. The deal is subject to customary closing conditions including necessary regulatory approvals. The support agreement provides for payments to Essar in the event that the acquisition is not completed under certain circumstances.

Algoma expects to hold the shareholders meeting to approve the arrangement in June, and that the acquisition would be completed shortly thereafter if approved by the shareholders. The Algoma Board of Directors has unanimously recommended that Algoma shareholders vote in favor of the transaction. Acting as exclusive financial advisor to Algoma in the transaction, Genuity Capital Markets has delivered an opinion to Algoma's Board of Directors that the consideration to be received by Algoma shareholders is fair, from a financial point of view.

"The Board of Directors unanimously supports the Essar proposal as it reflects a significant premium to the historical share price of Algoma,” said Benjamin Duster, Chairman of Algoma's Board of Directors said. “This transaction will also benefit Algoma's employees and the City of Sault Ste. Marie as it will result in new ownership that is committed to investment in Algoma's facilities to support growth and business sustainability."

"We believe Algoma is an excellent addition to our existing steel business and also offers growth potential,” said Shashi Ruia, Chairman of Essar Global Limited. “This acquisition fits in with our global steel vision of having world-class low-cost assets, with a global footprint. Algoma provides us with an excellent platform for the Canadian and North American markets. We are impressed with Algoma's management team and employees and look forward to working with them to enhance our industry leadership."

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Algoma Steel is an integrated steel producer based in Sault Ste. Marie, Ont., with steel shipments of 2.4 million tons in 2006. Revenues, which totaled Cdn$1.9 billion in 2006, are derived primarily from the manufacture and sale of rolled steel products including hot and cold rolled steel and plate.

Essar Global is an international conglomerate operating in six business areas steel, oil & gas, power, communications, shipping & logistics, and construction. It has offices worldwide and employs approximately 20,000 people, including over 3500 persons in the United States. The group has built a portfolio of assets with expected revenues of US$10 billion in the year to March 2008.

Essar Steel Holdings Limited is an emerging global steel company. It is a fully integrated manufacturer and one of the lowest cost producers of steel globally. With its subsidiaries, the group operates an integrated steel plant of 4.6 million tonnes/year in India, which is expected to be increased to an 8.5-million tonnes/year steel complex for flat products by 2009. The complex also comprises a cold rolling plant, down stream facilities and a 5-meter wide plate mill. It is India's largest exporter of flat steel.

Essar Steel Holdings Limited also operates a cold rolling complex in Indonesia and has now finalized plans to setup an integrated steel plant for flat products in Trinidad and Tobago and a hot strip mill in Vietnam.

UBS Investment Bank is acting as exclusive financial advisor to Essar and sole arranger of Essar's transaction financing. Stikeman Elliott LLP is acting as legal counsel to Essar, and Torys LLP is acting as legal counsel to Algoma Steel.