Esmark responded today that, although it has not received a copy of the lawsuit, it considers the action “frivolous.”
Meanwhile, Esmark’s filings with the Securities and Exchange Commission this week continue to tie the company to Essar of India.
Esmark had formed a joint venture called E2 in 2007 to mount a bid for ArcelorMittal’s Sparrows Point plant near Baltimore. Esmark intended to eventually merge the steel plant with Wheeling-Pittsburgh Steel Corp. and its steel service centers.
Esmark had been chosen by the U.S. Department of Justice as the bid winner for the Sparrows Point plant, which ArcelorMittal was selling to satisfy an antitrust decree.
However, Esmark’s $1.35 billion bid for the steel mill unraveled in December, shortly after Esmark completed its nearly two-year battle to merge with Wheeling-Pitt.
The Justice Department then put the Maryland plant out for bid again, with Russia’s Severstal the winner. Severstal and ArcelorMittal inked an $810 million cash deal that closed Wednesday.
Several financial wires report the $540 million lawsuit represents the difference between Esmark’s bid and the price Severstal paid for Sparrows.
Esmark responded with a statement today saying, “The company is surprised and disappointed that ArcelorMittal would file such a frivolous lawsuit.”
Esmark said it was not a party to agreements with ArcelorMittal pertaining to the proposed Sparrows Point transactions.
Further, Esmark contends ArcelorMittal failed to meet various conditions required to close the transaction and to resolve outstanding disputes with the United Steelworkers pertaining to the sale.
Esmark said ArcelorMittal failed to obtain the required consent of the United Steelworkers and admitted to that in its Nov. 14, 2007, earnings release, saying the transaction was “still pending approval of the United Steelworkers.”
Esmark said it “will vigorously defend against the lawsuit and pursue any claims it has against ArcelorMittal.”
The lawsuit pits ArcelorMittal, the owner of the former Weirton Steel Corp., against the owner of Wheeling-Pitt’s main steelmaking complex, a few miles south on the Ohio River.
Bloomberg News Service is reporting ArcelorMittal filed the lawsuit in New York state court and alleges Esmark concealed problems it was having in obtaining financing.
Esmark recently announced it has reached a tentative deal on a $17-per-share tender offer from Essar of India to purchase its service centers and Wheeling-Pitt. The deal, including assumption of debt, is worth about $1.1 billion, Esmark has reported.
That sale, however, is subject to review and approval by the United Steelworkers union, which has not made a public statement. The USW has the right, under its contract at Wheeling-Pitt, to form a competing bid for the company.
The company’s filings with the Securities and Exchange Commission indicate a $20.5 million termination fee will be owed to Essar if Esmark is sold to a firm other than Essar.
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