US steel distributor Esmark accepts buyout offer from India's Essar Steel Holdings

MORGANTOWN: India's Essar Steel Holdings Limited is buying U.S. steelmaker and distributor Esmark Inc. in a deal valued at $778 million (euro500.64 million), including a $110 million (euro70.79 million) long-term loan.

Esmark, which last year bought West Virginia's Wheeling-Pittsburgh Corp. and its steelmaking operations in three states, has accepted a cash purchase price of $17 (euro10.94) per share, or $668 million (euro429.86 million). The per share price represents a 13.5 percent premium over Tuesday's closing price of $14.98 (euro9.64).

If more than 50 percent of the outstanding shares are tendered, a cash-out merger would follow; all remaining shares of Esmark would be converted into the right to receive $17 (euro10.94).

Esmark also said Wednesday it has signed a commitment letter with Essar for a $110 million (euro70.79 million) term loan, expected to be funded by the middle of May. That money will be used to refinance the existing term loan and provide additional liquidity.

Esmark now enters a 52-day ``right to bid'' period required in the collective bargaining agreement with the United Steelworkers, which has the right to reject any deal that changes control of twice-bankrupt Wheeling-Pitt.

Esmark CEO James Bouchard said the company had been in talks with a number of potential partners.

The company needed a strategic partner in light of spiraling raw materials and transportation, difficulty securing long-term financing commitments and ``investment challenges associated with maximizing steel production capacity,'' he said.

The company planned a midafternoon conference call with investors to discuss the deal further, along with its fourth-quarter and year-end results from 2007.

Essar Americas President Madhu S. Vuppuluri said his company plans to invest in Wheeling-Pitt, which has operations in Ohio, Pennsylvania and West Virginia, to make it a low cost, technologically advanced steel producer.

``We look forward to a strong relationship with the United Steelworkers, our employees as well as the local communities,'' he said.

Essar's offer, unanimously accepted by Esmark's board of directors, is subject to regulatory approvals.

Esmark, previously a Chicago Heights, Illinois, distributor to the Midwest, is now headquartered in Wheeling, West Virginia. With the purchase of Wheeling-Pitt last year, it has become a producer of carbon flat-rolled products for the construction, container, appliance, converter/processor, steel service center, automotive and other markets.

Essar supplies steel to India, Canada, the United States, the Middle East and Asia.

Essar Global Ltd. has approximately $10 billion (euro6.44 billion) in assets in the steel, energy, communications, shipping and construction industries. It employs about 20,000 people and has operations in India, Canada, the U.S., Africa, the Middle East, Caribbean and Southeast Asia.