May 21 2008
OAO Severstal, one of the world's leading metals and mining companies, today announced that it has made a proposal to the Esmark Incorporated Board of Directors to acquire all of the outstanding shares of common stock of Esmark for $17.00 per share in cash.
Severstal is best positioned to optimize the value of Esmark by creating complementary product lines, geographical alignment and operational synergies. Further, Severstal has developed a highly credible restructuring plan designed to derive maximum value from Esmark, including a 5-year capital improvement plan that carries the full support of the United Steelworkers (the "USW"). Together, the combined company will become one of the North American leaders in flat rolled steel products.
Severstal’s proposal follows the April 30, 2008 announcement by Esmark of its agreement to be acquired by Essar Steel Holdings Limited and the May 16, 2008 announcement by the USW of its rejection of such a transaction. As part of its announcement, the USW demanded that Esmark repudiate the transaction agreements with Essar Steel, which were entered into in violation of the USW's right to bid provisions contained in its collective bargaining agreement with Esmark. The USW has further indicated that under another section of its labor agreement – the "successorship" clause – Esmark and Essar Steel cannot close their proposed transaction unless Essar Steel enters into a new labor agreement with the USW. The USW stated in its announcement that it will use such power to block the Essar Steel transaction.
In contrast to the proposed Essar Steel transaction, Severstal's proposal has the full and enthusiastic support of the USW. Severstal and the USW have also entered into an agreement that satisfies the successorship clause of the labor agreement.
Gregory Mason, CEO of Severstal International and COO of OAO Severstal, stated "While we hope to work together with Esmark and its board of directors to negotiate a mutually acceptable merger agreement, we believe that it is critical to give Esmark's stockholders a chance to decide for themselves and that they will find Severstal's proposal much more compelling than the Essar Steel transaction."
Severstal indicated in its letter that its proposal could be consummated within 40 days after entering into a merger agreement with Esmark.