Essar Steel to Sweeten Esmark Offer
06/12/2008 - Essar Steel Holdings announces plans to increase its offer for Esmark to US $19 per share, and says it is prepared to recognize the United Steelworkers, assume the Basic Labor Agreement, and negotiate a new collective bargaining agreement on an expedited basis.
Essar Steel Holdings Limited announced plans to increase its offer to purchase Esmark’s outstanding shares to US $19 per share. Essar has also said that it is prepared to recognize the United Steelworkers, assume the Basic Labor Agreement, and negotiate a new collective bargaining agreement on an expedited basis.
Essar and Esmark had previously entered into a memorandum of agreement (April 30, 2008) for Essar to acquire Esmark’s shares for a cash purchase price of US $17 per share. At that time, Essar had also extended a US $110-million loan to Esmark, which helped the company address a potential default. In addition, Essar has also proposed a capital expenditure program of US $525 million for Esmark’s Ohio and West Virginia manufacturing facilities over the next five years.
OAO Severstal, Russia, had made a competing bid of US $17 per share for Esmark. Severstal’s offer, which is supported by the United Steelworkers, was also accompanied by an offer to assume Esmark’s $400 million of debt.
Essar urged the Esmark Board to take all reasonable actions to create a level playing field among the bidders and to allow shareholders to receive maximum value for their shares. Essar said the Esmark assets would build synergies with its previously acquired U.S.-based assets—the four-million-tons/year Algoma Steel and Minnesota Steel, which controls vast iron ore reserves. The company said that the proposed acquisition would also provide real benefits to Esmark workers and the communities where they live and work through the secure supply of raw materials and the proposed capital expenditure in Esmark’s Ohio and West Virginia plants.
Essar Global Limited (EGL) is a diversified corporate group with businesses in the manufacturing and services sectors of Steel, Energy, Power, Telecommunications, Shipping, Ports & Logistics, Mining & Mineral Resources, and Construction. EGL has a firm value of approximately US $50 billion and employs 38,000 people worldwide. More than 15% of Essar’s workforce is in the Americas. EGL is privately owned and professionally managed.
Esmark Inc. is a vertically integrated steel producer and distributor, combining steel production capabilities through both blast furnace and electric arc furnace technologies with the just-in-time delivery of value-added steel products to a broad customer base concentrated in the Ohio Valley and Midwest regions.
Essar Steel is a global producer of steel operating out of India, North America, the Middle East and Asia. It is a fully integrated flat carbon steel manufacturer—from iron ore to ready-to-market products. Its current capacity of 8.5 million tons is expected to rise to about 20 million tons by 2012 with Essar’s expansion in India, Asia and North America. Essar successfully acquired Algoma Steel in 2007, and has increased production from 2.5 to 3.4 million tons/year in just 10 months through a capital expenditure program and improved work processes.
