Esmark Agrees to Essar Steel Merger
Takeover valued at $670 million; includes $110-million loan
Takeover valued at $670 million; includes $110-million loan
Esmark Inc has agreed to a proposed merger with Essar Steel Holdings Ltd. at a price of $17.00/share, or about $670 million. A definitive agreement will follow a "right to bid" period set forth in Esmark’s labor agreement with the United Steelworkers union, which the company estimates at 52 days.
Also, Esmark has received a commitment from Essar for a $110-million term loan, which will be used to refinance the existing term loan, and provide new capital.
Esmark is the holding company for Wheeling-Pittsburgh Steel and a variety of flat-rolled steel processing and distribution centers. It has tried to assemble a steelmaking and distribution organization, a strategy first outlined with its takeover of Wheeling-Pitt in 2006. Later plans to increase its low-cost steelmaking capacity by buying ArcelorMittal’s Weirton, WV, works, and next the Sparrows Point, MD, works, in order, were unsuccessful.
Essar Steel Holdings based in India, has operations there and in the Middle East. In 2007 Essar paid $1.6 billion for Algoma Steel in Ontario, and invested a similar amount to take over the Minnesota Steel project, which aims to establish an ironmaking and electric steelmaking operation in the Minnesota Iron Range by early 2009. A recent industry ranking listed Essar as the world’s 62nd largest steelmaker by volume, thought its raw steel output for 2007 does not include the full volume produced by Algoma.
In a statement, Esmark Americas president Madhu S. Vuppuluri predicted his firm would “make significant investments” in Wheeling-Pitt, but did not address future management or organizational issues. The offer has been accepted unanimously by Esmark's board of directors, but remains subject to certain conditions, including acceptance by Esmark’s common stock-holders, and approval by the Dept. of Justice and Committee on Foreign Investment in the United States.
"The proposed merger with Essar is the culmination of an extensive review of the strategic options available to the company that included exploratory discussions with a number of potential partners,” stated James P. Bouchard, Esmark chairman and CEO. “With spiraling raw material and transportation costs, difficulty securing long-term financing commitments, and the investment challenges associated with maximizing steel production capacity, we were convinced that a strategic partner like Essar was the best possible solution for the long-term prospects of the company moving forward.”
According to Vuppuluri, "Essar is very excited about the potential merger with a great company located in the steel capital of the United States. We plan to make significant investments into Wheeling-Pittsburgh Steel to make it a low-cost, technologically advanced steel producer. We look forward to a strong relationship with the United Steelworkers, our employees as well as the local communities."
Also, Esmark has received a commitment from Essar for a $110-million term loan, which will be used to refinance the existing term loan, and provide new capital.
Esmark is the holding company for Wheeling-Pittsburgh Steel and a variety of flat-rolled steel processing and distribution centers. It has tried to assemble a steelmaking and distribution organization, a strategy first outlined with its takeover of Wheeling-Pitt in 2006. Later plans to increase its low-cost steelmaking capacity by buying ArcelorMittal’s Weirton, WV, works, and next the Sparrows Point, MD, works, in order, were unsuccessful.
Essar Steel Holdings based in India, has operations there and in the Middle East. In 2007 Essar paid $1.6 billion for Algoma Steel in Ontario, and invested a similar amount to take over the Minnesota Steel project, which aims to establish an ironmaking and electric steelmaking operation in the Minnesota Iron Range by early 2009. A recent industry ranking listed Essar as the world’s 62nd largest steelmaker by volume, thought its raw steel output for 2007 does not include the full volume produced by Algoma.
In a statement, Esmark Americas president Madhu S. Vuppuluri predicted his firm would “make significant investments” in Wheeling-Pitt, but did not address future management or organizational issues. The offer has been accepted unanimously by Esmark's board of directors, but remains subject to certain conditions, including acceptance by Esmark’s common stock-holders, and approval by the Dept. of Justice and Committee on Foreign Investment in the United States.
"The proposed merger with Essar is the culmination of an extensive review of the strategic options available to the company that included exploratory discussions with a number of potential partners,” stated James P. Bouchard, Esmark chairman and CEO. “With spiraling raw material and transportation costs, difficulty securing long-term financing commitments, and the investment challenges associated with maximizing steel production capacity, we were convinced that a strategic partner like Essar was the best possible solution for the long-term prospects of the company moving forward.”
According to Vuppuluri, "Essar is very excited about the potential merger with a great company located in the steel capital of the United States. We plan to make significant investments into Wheeling-Pittsburgh Steel to make it a low-cost, technologically advanced steel producer. We look forward to a strong relationship with the United Steelworkers, our employees as well as the local communities."
