Essar to raise offer for Esmark

07 June 2008

New York: Essar Steel Holdings Limited (Essar) has informed the Esmark Board of Directors that it is open to considering raising its 30 April offer to acquire Esmark Inc at $17 per share. Essar had proposed acquiring Esmark for $669 million on 30 April (See: Essar Steel to acquire American steelmaker Esmark for $669 million) 

Essar also said that it would consider making an increased bid after it had obtained additional information from Esmark.

OAO Severstal, the metals and mining company controlled by Russian billionaire Alexei Mordashov, put in a matching bid to acquire the US steel maker at an equivalent price, with the United Steel Workers supporting the the Rusian steelmaker (See: Russia's Severstal makes rival bid to Essar's bid for Esmark).

On the invitation of Esmark and financial advisor UBS, Essar had participated in a bidding process for the sale of Esmark shares, which was unanimously accepted by the Esmark Board.

Following Esmark's acceptance of Essar's offer on 30 April, 2008, Essar entered into a memorandum of agreement with Esmark to acquire Esmark Inc. at an estimated enterprise value of $1.1 billion, which includes a proposed tender offer for a cash purchase price of $17 per share of all outstanding shares of the Nasdaq listed steel company.

At Esmark's request, Essar also extended a $110 million loan to Esmark, which helped the company address a potential default. As part of the acquisition strategy, Essar has proposed a capital expenditure program of $525 million for Esmark's Ohio and West Virginia manufacturing facilities over the next five years.

Essar's bid had been approved by the Esmark board, but had failed to garner support from the United Steelworks Union (USW), which is a pre-requisite under labour agreements entered into by the US company.