Esmark Gives in to Severstal for $775 Million
Russian steelmaker is now fourth-largest in U.S.
Russian steelmaker is now fourth-largest in U.S.
Russia’s OAO Severstal has reached a merger agreement with Esmark Inc. to acquire the steelmaker and steel prcessor for an estimated $775 million. The agreement ends a hostile takeover effort that began in May, and ends Essar Steel Holdings’ effort to buy Esmark for about $670 million.
Esmark had agreed to Essar’s offer prior to Severtal’s approach, but Severstal had the United Steelworkers union supporting its bid. Esmark’s labor contract gave the USW a “right to bid” if the company should receive any unwelcome takeover offers.
While Severstal matched the initial Essar offer of $17/share, Essar returned with an offer of $19/share. The apparent winning bid will pay $19.25/share for Esmark.
Current and prospective holdings give Severstal about 13.5 million tons of U.S. raw steel capacity, ranking fourth among domestic producers. Alexei Mordashov, CEO of OAO Severstal, called the merger “an extension of the progress that began with our acquisition of Rouge Industries in 2004 and that has continued through to our recent purchases of Sparrows Point and consistent with our agreement to purchase WCI Steel.
“With Esmark as part of our U.S. portfolio, we’re well positioned to provide domestic supply to a market that has a consistent demand for high-quality steel,” Mordashov stated.
OAO Severstal is the Moscow-based holding company for Severstal International, which includes a growing portfolio of U.S. steelmaking assets. Among its North American holdings, it already lists integrated steel works in Dearborn, MI, and Sparrows Point, MD, and a flat-rolled mini-mill in Columbus, MS. It has a pending purchase of WCI Steel in Warren, OH.
With the purchase of Esmark, Severstal will acquire, Wheeling-Pittsburgh Steel, an integrated steel mill; Esmark Steel Services Group Inc., a steel processing chain; and the outstanding 50% of Mountain State Carbon, a joint-venture cokemaking plant in Follansbee, WV.
According to Severstal, it has an operating and restructuring plan for the Esmark assets that, along with a five-year capital improvement plant, will emphasize Wheeling-Pitt’s EAF steelmaking, upgrade the capacity and product quality of the plant’s hot-strip mill, and improve downstream operations. The group also indicates it will be “leveraging synergies and geographical alignment between North American assets.”
Severstal states it has an agreement with the USW that satisfies the successorship clause in its current collective-bargaining agreement.
Esmark had agreed to Essar’s offer prior to Severtal’s approach, but Severstal had the United Steelworkers union supporting its bid. Esmark’s labor contract gave the USW a “right to bid” if the company should receive any unwelcome takeover offers.
While Severstal matched the initial Essar offer of $17/share, Essar returned with an offer of $19/share. The apparent winning bid will pay $19.25/share for Esmark.
Current and prospective holdings give Severstal about 13.5 million tons of U.S. raw steel capacity, ranking fourth among domestic producers. Alexei Mordashov, CEO of OAO Severstal, called the merger “an extension of the progress that began with our acquisition of Rouge Industries in 2004 and that has continued through to our recent purchases of Sparrows Point and consistent with our agreement to purchase WCI Steel.
“With Esmark as part of our U.S. portfolio, we’re well positioned to provide domestic supply to a market that has a consistent demand for high-quality steel,” Mordashov stated.
OAO Severstal is the Moscow-based holding company for Severstal International, which includes a growing portfolio of U.S. steelmaking assets. Among its North American holdings, it already lists integrated steel works in Dearborn, MI, and Sparrows Point, MD, and a flat-rolled mini-mill in Columbus, MS. It has a pending purchase of WCI Steel in Warren, OH.
With the purchase of Esmark, Severstal will acquire, Wheeling-Pittsburgh Steel, an integrated steel mill; Esmark Steel Services Group Inc., a steel processing chain; and the outstanding 50% of Mountain State Carbon, a joint-venture cokemaking plant in Follansbee, WV.
According to Severstal, it has an operating and restructuring plan for the Esmark assets that, along with a five-year capital improvement plant, will emphasize Wheeling-Pitt’s EAF steelmaking, upgrade the capacity and product quality of the plant’s hot-strip mill, and improve downstream operations. The group also indicates it will be “leveraging synergies and geographical alignment between North American assets.”
Severstal states it has an agreement with the USW that satisfies the successorship clause in its current collective-bargaining agreement.
