Severstal Extends Tender Offer to Acquire Esmark
06/02/2008 - OAO Severstal commences its all-cash, $17.00 per share tender offer to acquire all outstanding shares of Esmark common stock; the offer has the full support of the United Steelworkers.
OAO Severstal has commenced an all-cash, $17.00 per share tender offer to acquire all outstanding shares of Esmark Inc. common stock.
Although Severstal’s tender offer is not conditioned on financing, it is conditioned, among other things, on termination of the April 30, 2008 Memorandum of Agreement between Esmark and Essar Steel Holdings Ltd. and, if entered into prior to the expiration of the Severstal tender offer, the Agreement and Plan of Merger between Esmark and Essar. Other customary terms and conditions also apply.
Severstal's offer has the full endorsement of the United Steelworkers. Under the USW's collective bargaining agreement with Esmark, Esmark cannot close on a sale transaction unless the purchaser has entered into an agreement with the USW that satisfies the labor agreement’s successorship clause. Severstal and the USW have already entered into an agreement that satisfies the labor agreement’s successorship clause.
If conditions of the offer are satisfied and Severstal completes the second-step merger, Severstal would acquire all of the Esmark businesses, including:
- Wheeling-Pittsburgh Steel Corp.
- Esmark Steel Services Group, Inc. (ESSG)
- Remaining 50% ownership of the joint venture Mountain State Carbon, a blast furnace coking coal production facility in West Virginia
Severstal said its acquisition of Esmark would provide it with an opportunity to grow its U.S. footprint, and that the increased crude and finished steel capacity as well as Esmark's network of service centers and processor businesses in the Midwestern United States would enhance its U.S. market position. Severstal said it would also benefit from Wheeling-Pittsburgh's central location between the company's existing U.S. assets (in Dearborn, Mich., Sparrows Point, Md., and Columbus, Miss.) and its broad reach into the U.S. industrial market by virtue of its location on the Ohio River and access to major highways and railways.
Severstal’s tender offer is scheduled to expire on June 26, 2008, unless extended. Following completion of the tender offer, subject to the terms and conditions set forth in the Offer to Purchase, Severstal intends to consummate a second-step merger where all remaining Esmark stockholders would receive the same cash price paid in the tender offer, subject to any available appraisal rights under Delaware law.
Merrill Lynch is the Dealer Manager, MacKenzie Partners, Inc. is the Information Agent, and Citibank, NA is the Depositary for the tender offer. Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel to Severstal.
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. Severstal owns mining assets in Russia, thus securing its supplies of raw materials. In 2007, Severstal produced 17.5 million tons of steel. Revenues were $15.2 billion, EBITDA was $3.7 billion, and EPS was $1.92.
