"We are looking at all the options... but as of now, we are awaiting the results of arbitration between Esmark and its union," a Severstal official said on condition of anonymity.
Severstal has made an all-cash offer of $17 per Esmark share as opposed to Essar's $19 a share. However, the United Steelworkers Union (USW), which has the power to veto any deal that changes control of the company, has threatened to block the Essar deal. Using this veto power, USW has brought in Severstal with a matching offer of $17 per share, valuing the equity at $670 million.
Esmark shares have already shot up above $20 a share on anticipation of a counter-offer from Severstal. Analysts say Severstal can either sweeten its offer or take Esmark to the court for signing a one-sided deal.
With both Esmark and USW, the largest industrial labour union in North America, sticking to their guns, the matter has now landed in arbitration, which will announce its decision on Saturday. In an email to this newspaper, USW refused to comment on the issue.
In a letter dated June 16 to the Esmark board, Severstal alleged that the former has failed to take its shareholders' interest into consideration while recommending the Essar bid. It also said that the proposed termination fees to Essar and a poison pill by way of denying voting rights to anyone holding more than 15 per cent shares will not provide level playing field to the Russian steel firm.
An Essar official refused to comment on the issue. But company insiders said that they are expecting Esmark shareholders to take their $19-a-share offer. "We are in talks with all the parties concerned, including the union. By middle of the next week, we can expect some positive development," the official said.
More From This Section
For both Essar and Severstal, the acquisition of Esmark is crucial to get an entry into the North American markets. For Severstal, winning Esmark would give it immediate access to the growing America.
Interestingly, the largest shareholder in Esmark, Franklin Mutual, has already tendered its 60 per cent shares in Severstal's favour, saying the Russian firm has the backing of USW.
On June 13, Esmark introduced a defence measure, commonly known as a poison pill, against the hostile takeover plans of Severstal. Esmark now has the right to issue more shares to existing shareholders if a hostile acquirer buys more than 15 per cent of its outstanding shares to dilute the holding of the hostile acquirer.
Severstal, controlled by billionaire Alexei Mordashov, said on Tuesday that it is disappointed with Esmark's decision to reject its cash offer in favour of Essar.