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Severstal Buying American Esmark
Severstal intends to buy the American company Esmark, owner of Wheeling Pittsburgh Steel, for $668 million, not counting its debt. That is the same amount offered by Severstal’s competitor, the Indian company Essar, which was unable to buy Esmark because of union opposition after it could not guarantee the preservation of jobs at the plant. Severstal sent Esmark’s board of directors a proposal to buy 100 percent of the company at $17 per share yesterday. Severstal intends to pay for the shares in cash. Merrill Lynch and Citi served as financial consultants. The United Steel Workers union has supported Severstal proposal. Severstal will pay for the U.S. company through a $1.5-billion Eurobond issue this summer.
Esmark produced 1.15 million tons of steel in 2007. Its total receipts in the 2007 financial year amounted to $825 million and its net profit was $9 million. Its total assets are worth $1.7 billion and its net debt is more than $400 million. Esmark’s capitalization on NASDAQ yesterday after the publication of Severstal's offer rose 17.7 percent to $707 million.
Severstal bought the American company WCI Steel only days ago. The news of its latest purchase caused its stock to fall 4.38 percent on the RTC and 6.53 percent on the LSE. Observers attribute those losses to Esmark’s poor financial indicators. Nonetheless, the synergy between Severstal’s several American assets should make the acquisition a profitable one for the Russian steelmaker, with Sparrow Point supplying Esmark and Esmark supplying WCI. If the deal for Esmark is completed successfully, Severstal’s production capacity in the United States will exceed 11 million tons. Keeping its promise not of no layoffs at Esmark will increase Severstal’s expenses by about 3 percent.
www.kommersant.com
All the Article in Russian as of May 21, 2008
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