Alexey Mordashov, the main owner of Severstal, thinks the Indian offer will not deliver value to Esmark shareholders.
Photo: Mikhail Razuvaev
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Severstal Cries Foul over Esmark
After the board of directors of the American steelmaker Esmark decided to accept the takeover offer of the Indian Essar company, Essar’s competitor in the deal, Severstal, has written an open letter to Esmark accusing it of unfair practices. “Your contemplated transaction with Essar Steel Holdings Ltd… cannot realistically be consummated, and, thus, will not deliver value to your shareholders,” Gregory Mason, president of Severstal International, wrote. Essar first expressed interest in Esmark in April of this year, offering $17 per share ($668 million total) for it. The company’s union, the United Steelworkers, opposed the takeover and suggested Severstal as an alternative buyer. Severstal agreed to buy the company at the same price, but the Indians raised their offer to $19 per share ($750 million for the company) and promised a $525-million, five-year investment program. That offer was accepted.
Esmark’s main asset is the Wheeling Pittsburgh Steel Corp. It delivered 1.15 million tons of steel in 2007. Esmark’s total receipts for the 2007 financial year were $825 million, with a net loss of $9 million. Its total assets are worth $1.7 billion and its net debt is more than $400 million. Its capitalization on NASDAQ yesterday grew 0.9 percent to $798 million ($20.20 per share).
The Severstal letter suggests that the agreement signed between Essar and Esmark in April was discriminatory because it included penalties for Esmark should it accept the Severstal offer. Severstal considers it a poison pill. The United Steelworkers continue to support Severstal. Observers say that, since Mordashov lost the battle for Arcelor, Severstal cannot give up without fights. They add that, although it made an adequate bid for Esmark to begin with, it would not be paying too much if it met Essar’s offer.
www.kommersant.com
All the Article in Russian as of June 18, 2008
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