Severstal begins $17-per-share offer for Esmark

By Lisa Kerner

Charlotte, N.C., May 30 - OAO Severstal said it began its all-cash $17-per-share tender offer to acquire all of the outstanding shares of Esmark Inc.

The offer is set to expire at midnight ET on June 26 unless extended, a Severstal news release stated.

Following completion of the tender offer, all remaining Esmark stockholders will receive the same cash price paid in the offer in a second-step merger, Severstal said.

One condition to the offer is the termination of the April 30 agreement between Esmark and Essar Steel Holdings Ltd.

According to Severstal, the tender offer is not conditioned on financing.

Esmark said its board of directors will consider Severstal's unsolicited offer consistent with the company's obligations under its agreement with Essar Steel.

The company expects to advise its shareholders on or before June 13 whether the Esmark board recommends acceptance or rejection of the Severstal offer or remains neutral, an Esmark news release said.

Esmark urged its shareholders not to take action with respect to the Severstal offer at this time.

Merrill Lynch is the dealer manager, MacKenzie Partners, Inc. is the information agent and Citibank, NA is the depositary for the tender offer.

As previously reported, Severstal believes its proposal constitutes a superior proposal to Essar Steel's offer for Esmark, a Wheeling, W.V., steel producer.

While Essar Steel's April 30 offer to buy Esmark for $670 million was rejected by the United Steelworkers, the union supports Severstal's five-year capital improvement plan for Esmark, a prior Severstal news release stated.

Franklin Mutual Advisers, LLC, with a 60.1% stake in Esmark, urged the company to conclude a merger agreement with Severstal rather than Essar Steel, according to a schedule 13D filing with the Securities and Exchange Commission.

Severstal, a Moscow-based metals and mining company, noted that potential synergies with Esmark would be further enhanced once Severstal closes its $140 million acquisition of WCI Steel Inc., a Warren, Ohio-based producer of value-added custom steel products that is not currently a public reporting company.

Essar Steel, part of Essar Global Ltd., is an Essar, India, flat carbon steel manufacturer.

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