Essar sweetens bid for Esmark to thwart rival firm Severstal

Essar sweetens bid for Esmark to thwart rival firm Severstal
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First Published: Thu, Jun 12 2008. 12 05 AM IST
Updated: Thu, Jun 12 2008. 12 05 AM IST
Mumbai: The largest promoter of Essar Steel Ltd, Essar Steel Holdings Ltd (ESHL), on Wednesday sweetened its offer for US-based steel maker Esmark Inc. and expressed willingness to negotiate with the powerful union of steel workers in the US, in an effort to thwart a rival bid by Russia’s largest steel maker OAO Severstal.
The company’s revised offer of $19 (Rs815) a share, up from its earlier bid of $17 a share, takes the total deal value, including $430 million of debt, to about $1.18 billion from about $1.10 billion earlier.
Severstal, which has the crucial support of the steel workers’ union in the US and the backing of Esmark’s largest shareholder, had offered $17 a share for the company.
ESHL’s move came a day after Esmark’s chairman and chief executive James Bouchard said the board would take a decision on Severstal’s offer on Friday.
Esmark shares rose more than 7% to $20.10 in early trade on the Nasdaq in the US, suggesting that investors were expecting a still higher bid.
“In setting forth its plans for Esmark, Essar has also proposed a capital expenditure programme of $525 million for Esmark’s Ohio and West Virginia manufacturing facilities over the next five years,” ESHL said in a statement.
The company also said it has communicated to Esmark that it is “prepared to recognize the United Steelworkers (USW), assume the basic labour agreement and negotiate a new collective bargaining agreement on an expedited basis”.
ESHL made its first offer in late April to acquire all outstanding shares of Esmark for $17 per share, and had extended a $110 million loan to help Esmark avoid default.
But USW, a powerful union of steel workers in the US and Canada, had vowed to block ESHL’s offer.
Severstal matched ESHL’s bid in May, but it also had the support of USW, which has the right to block any change in Esmark’s management.
Esmark’s largest shareholder Franklin Mutual Advisers Llc., with 60.4% of its stock, has also backed Severstal.
This is the second time ESHL and Severstal have competed in recent times for the same asset.
Earlier, Severstal beat ESHL in a bidding war for ArcelorMittal’s Baltimore-based Sparrows Point plant.
Both ESHL and Severstal have been expanding in the region, where prices for steel products have been rising.
In addition to Sparrows Point, Severstal bought Ohio-based WCI Steel Inc. this year, while ESHL bought two plants in North America last year.
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First Published: Thu, Jun 12 2008. 12 05 AM IST