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Severstal Completes Esmark Acquisition

08/06/2008 - OAO Severstal completes its acquisition of Esmark Inc., which will now be known as Severstal Wheeling Holding Co.

OAO Severstal has completed its acquisition of Esmark Inc., following the merger of Severstal Wheeling Acquisition Corp., a wholly-owned subsidiary of Severstal, with and into Esmark. As the surviving corporation in the merger, Esmark is now a wholly-owned subsidiary of Severstal and has been renamed Severstal Wheeling Holding Co.
 
With completion of the tender offer and consummation of the merger, Severstal acquired all of Esmark's businesses, including:
 
  • Wheeling-Pittsburgh Steel Corp., which will be renamed Severstal Wheeling, Inc.
  • Esmark Steel Services Group, Inc., which will be renamed Northern Steel Group, Inc.
  • Remaining 50% ownership of the joint venture Mountain State Carbon, a blast furnace coking coal production facility in West Virginia
 
“The acquisition of Esmark represents a significant step in Severstal's North American growth strategy,” commented Gregory Mason, CEO of Severstal International and COO of OAO Severstal. “Not only does the addition of Esmark bring considerable stand-alone growth potential while also creating synergies with our existing US plants, it solidifies Severstal's position as one of the leading integrated steel companies in the fast consolidating North American market. We are now poised to be a leading producer and supplier of domestically produced steel to a region that has a consistent demand for high quality products.”
 
The offering period for Severstal's tender offer for all outstanding shares of Esmark expired on Monday, August 4, 2008, with a total of 38,767,487 Esmark shares being validly tendered in the offer and not withdrawn, representing approximately 94.17% of the outstanding shares of common stock of Esmark. All shares that were validly tendered during the tender offer have been accepted for purchase, and Severstal paid for all validly tendered and delivered shares on August 4, 2008.
 
Following expiration of the offering period, Severstal effected a merger to complete the acquisition of Esmark without a vote or meeting of Esmark stockholders pursuant to the short-form merger procedure available under Delaware law. In the merger, each outstanding Esmark share not tendered and purchased in the offer (other than shares in respect of which appraisal rights are validly exercised under Delaware law) were converted into the right to receive the same $19.25 per share price, without interest and less any required withholding taxes, that was paid in the tender offer. As a result of the merger, Esmark's common stock will cease to be traded on the NASDAQ Global Select Market.
 
With a total equity value of approximately $775 million, the acquisition is expected to be accretive in 2009 based on current projections of costs and prices.
 
Merrill Lynch acted as lead financial advisor, Citi acted as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal counsel, to Severstal. MacKenzie Partners, Inc. served as Information Agent for the tender offer. 
UBS Securities, LLC acted as lead financial advisor, Charlestown Capital Advisers, LLC acted as equity adviser, Raymond James and Associates, Inc. acted as debt advisor, and McGuireWoods LLP acted as legal counsel to Esmark.
OAO Severstal, an international metals and mining company, focuses on high value-added and unique niche products and has a successful track record of acquiring and integrating high-quality assets in North America and Europe. Incorporated in 1993, Severstal owns mining assets in Russia, thus securing its supplies of raw materials. In 2007, Severstal produced 17.5 million tons of steel and reported revenues of $15.2 billion, EBITDA of $3.7 billion, and EPS of $1.92.
 
Severstal International is an operating division of OAO Severstal comprising North American and European segments.