India’s Essar Buying U.S. Steelmaker Esmark

Esmark Inc. says it has accepted a buyout offer valued at about $669 million from India's Essar Steel Holdings.

MORGANTOWN, West Virginia (AP) -- Steelmaker and distributor Esmark Inc. says it has accepted a buyout offer valued at about $669 million (euro430.5 million) from India's Essar Steel Holdings Ltd.

Esmark said Wednesday it has agreed to a cash purchase price of $17 (euro10.94) per share. With about 39.3 million shares outstanding, that values the bid at $669 million (euro430.5 million). The offer is 13.5 percent higher than Tuesday's closing price.

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's 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 an afternoon conference call with investors to discuss the deal further, along with its fourth-quarter and year-end results from 2007.

Esmark's purchase of Wheeling-Pitt was the culmination of a yearlong effort by Bouchard and brother Craig to add a steel producer to their distribution network, which serves 2,000 customers in the U.S. Midwest. Esmark initially seized control of Wheeling-Pitt in a proxy fight in the fall of 2006.

Twice-bankrupt Wheeling-Pitt had struggled financially for years and was mired in $525 million in debt at the time. Recently, the Bouchards announced plans to lay off workers and shut down some Wheeling-Pitt operations.

Some industry analysts have long criticized Wheeling-Pitt for having a bloated work force and an expensive cost structure.

Essar also has been expanding. Last year, it bought a Canadian steel plant for $1.6 billion (euro1.03 billion) and said it plans to build a second $1.6 billion mill on northern Minnesota's iron range.

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's 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.

Associated Press writer Tim Huber in Charleston contributed to this report.
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