The Hindu Business Line : Esmark rejects Severstal offer of $17/share

Mumbai June 13 Essar Steel moved a step closer towards acquisition of West Virginia-based Esmark, as the US steel maker rejected the $17 a share offer made by rival suitor Russia’s Severstal.

Earlier this week, Essar Steel sweetened its original offer of $17 a share for Esmark, increasing it by about 12 per cent to $19 a share. At this price, Essar will have to pay $1.2 billion to snap up Esmark, which operates a 2.5-million-tonne integrated steel mill in West Virginia.

In another development, Esmark, through its subsidiary, filed a charge under the National Labour Relations Act against United Steelworkers Union, alleging multiple violations of federal labour law for its attempts to block the proposed acquisition by Essar Steel.

With the union supporting Severstal’s offer, this development is expected to pave the way for Essar’s acquisition of Esmark.

The Esmark board, after reviewing Severstal’s offer, felt that it was “inadequate in a number of respects, uncertain with respect to its (Severstal’s) ability to close and contrary to the best interests of Esmark’s stockholders.” Accordingly, the board has recommended its stockholders not to tender any shares to Severstal.

Only a few months ago, Essar and Severstal had locked horns for acquisition of Maryland-based Sparrows Point, with the Russian steel major breasting the tape at that time.

However, Severstal still has got about 10 days left to increase its offer for Esmark and out-bid Essar.

“We continue to invite bidders, including Severstal, to provide a superior proposal to that of Essar. To date, Essar has stepped up to the plate for our stockholders — first in providing financing to the company at a critical time and now by announcing that it will increase its offer to $19 per share.

In addition, Essar has committed to provide over $500 million of capital investment in the Ohio valley,” Mr James Bouchard, Chairman and CEO of Esmark, said.