Essar raises Esmark offer by 10% to $19/share

With today's offer, Essar has topped the $17-a-share offer made by Severstal and the acquisition would cost the Indian company close to $1.2 billion, a company official said. "Essar Steel Holdings yesterday informed the Esmark board of directors that the company is providing notice of its intention to increase its offer to purchase all of the outstanding shares of Esmark. Upon execution of the merger agreement, Essar will increase its offer to $19 a share," a statement by Essar said.

Essar had to revise its offer as Severstal's bid is backed by the United Steelworkers union, which had threatened to block the Mumbai-based company's offer.

On April 30, Essar entered into a memorandum of agreement with Esmark to acquire all the outstanding shares of Esmark for a cash purchase price of $17 a share. In conjunction with the agreement, Essar also extended a $110-million loan to Esmark, which helped the company address a potential default.

Franklin Mutual Advisers, which owns about 60 per cent of Esmark's shares, said in a regulatory filing that it tendered all its shares into the Severstal offer because the Steelworkers union is opposed to the Essar bid.

Essar had previously informed Esmark that it was prepared to recognise the United Steelworkers demands and negotiate a new collective bargaining agreement on an expedited basis. In setting forth its plans for Esmark, Essar has also proposed a capital expenditure programme of $525 million for Esmark's Ohio and West Virginia manufacturing facilities over the next five years.

In its letter dated June 10, Essar urged the Esmark board to take all reasonable actions to create a level playing field among the bidders and to allow shareholders to receive maximum value for their shares.

Along with its acquisitions of the 4 million-tonne-per-annum Algoma Steel Plant in Canada and Minnesota Steel in the US, which controls vast iron ore reserves, the Esmark acquisition will help Essar unleash greater synergies across its facilities in the Americas, a statement by the Essar group said.