Ruias-controlled Essar Steel Holdings may raise its bid for US-based Esmark after OAO Severstal, Russia's largest steel maker, matched the Indian steel maker's $17 a share offer, which valued the company at $668 million, sources said. The winning bidder will also have to take on a debt of $400 million, taking the total exposure to $1.1 billion.
The Ruias will submit its revised bid after negotating with the United Steel Workers (USW), the representative union for the US steel industry. When contacted, Essar officials declined comment on the new offer.
The purchase of Esmark will help Essar to integrate its operations in the US with the recently acquired companies, including Canada-based Algoma Steel and US-based Minnesota Steel. Essar needs a steady supply of steel for its plate making and galvanising operations at the Wheeling-Pitt plant.
Meanwhile, Severstal officials claimed that it has the critical support of the union. Essar's bid was opposed by the labour union, which said that the Esmark board unilaterally accepted the Ruias bid without giving an adequate notice or a chance to put forth an alternative.
Steelworkers in Esmark are wary of Essar as they anticipate layoffs and salary cuts. Subsequently, a group of union members persuaded Severstal to come forward with a counter offer. USW's contract with Esmark gives the union 52 days to find an alternative bidder.
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Esmark Chairman and Chief Executive James Bouchard will meet with Severstal to discuss its offer, the US media reported on Wednesday. Supporting Essar's offer, Bouchard said, "We brought the Essar management to Pittsburgh early in the negotiation process to meet union officials and consistently invited USW's involvement in support of the Essar transaction," reports said.
Severstal, which is also the fourth-largest steel maker in the US, is adding production capacity. A shortage of the metal has pushed prices to record levels in the US. Interestingly, steel tycoon LN Mittal has significant presence in the region and looking for expansion as well.