June 14, 2008
Essar Promises Pittsburgh-Based Headquarters
By Joe Napsha, The Pittsburgh Tribune-Review
Jun. 14--Pittsburgh will gain another steel company headquarters, if India-based Essar Steel Holdings Ltd. wins the battle to buy Esmark Inc. and its subsidiary, Wheeling-Pittsburgh Steel, the head of Essar-Americas said Friday.
Essar Steel, which is competing against Russian steelmaker OAO Severstal to buy Esmark, would move its Essar-Americas headquarters from New York City to Pittsburgh to be close to the new company's operations and give it a better understanding of those facilities, said Madhu Vuppuluri, president of Essar-Americas, the North American arm of Essar Steel.
"We want to have a presence in Pittsburgh," Vuppuluri said.
Pittsburgh is home to the nation's largest steel company, U.S. Steel Corp., and the union that represents the workers who make steel, the United Steelworkers.
Wheeling-Pittsburgh Steel, and its predecessor Pittsburgh Steel Co., had been headquartered in Pittsburgh until Wheeling-Pitt emerged from bankruptcy in 1986 and moved its headquarters to Wheeling, W.Va. Esmark, which was based outside Chicago before moving to Wheeling, planned to move the headquarters to the Wexford area.
Esmark's steel distribution and steelmaking facilities would be a good fit in Essar-Americas operations, Vuppuluri said. Essar Steel bought and expanded Algoma Steel Corp. in Canada; it has Minnesota Steel with its 1.4 billion tons of iron ore reserves and is planning a steel mill operation in Trinidad.
"It fits in our global steel strategy to emerge as a significant player in steel production. Esmark will become a significant part of the global steel company," Vuppuluri said.
Essar this week boosted its bid for Esmark by $2 a share to $19, topping Severstal's bid by $2 a share. Essar, which has an agreement to buy Esmark, cannot enter into a definitive sales agreement until June 23, said Esmark spokesman Dennis Halpin. Essar's cash offer tops $750 million.
But, Severstal has the support of Esmark's largest shareholder, Franklin Mutual Advisers, a private equity group that holds a 60 percent stake.
The USW, which has a right-to-bid provision in its contract with Esmark, has until Friday to present a bidder to the Esmark board for its review, Halpin said. The USW has said it supports Severstal's bid, but has not made a formal offer to the Esmark board, Halpin said.
Essar's bid to buy Esmark includes the purchase of Wheeling-Pittsburgh's Allenport mill, Vuppuluri said. The Essar executive said he did not have sufficient information to comment about the Allenport mill, which ceased production several weeks ago. Vuppuluri said he was not aware Esmark had signed a letter of intent to sell the cold rolled steel plant in Washington County.
William Kinney, president of the United Steelworkers Local 1187, which represents about 240 employees who worked at the plant, said yesterday that he was not aware that the Allenport plant would be included in a deal with Essar.
The prospective buyer of the Allenport plant told Kinney during a meeting at the mill this week that "he had a handshake deal with (Esmark Chief Executive) Jim Bouchard," to buy the Allenport mill, Kinney said. The entrepreneur, whom Kinney would not identify, said he had hoped to learn by the end of the month whether he will be able to buy the plant.
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