Esmark Sued for $540 Million
By PAUL GIANNAMORE For the News-Register
POSTED: May 9, 2008
Article Photos
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.
Member Comments
View Comments: | 1-8 | Post a comment
|
oldsteelmaker
|
|
|---|---|
|
05-12-08 11:15 AM
|
If Esmark did not put some sort of escape clause in the offer about financing, they were idiots. How often do you see an offer to buy a house that isn't contingent to getting a mortgage? Since the court stopped the sale, Esmark can argue they were "almost there" when the court interfered, and the suit is likely to be tossed. Also, Mittal will have to sue all the parties of E2, not just Esmark, and some of them have as many lawyers as Mittal. If Esmark is losing money with the current prices they deserve to go broke, and take the union bosses down with them. CSM would not be running out of money.
|
|
oldsteelmaker
|
|
|
05-12-08 10:31 AM
|
To Uncommonsense: The American steel industry is far from destroyed. Thanks to the improved technology and consolidation of companies they ship more than they did in the glory days of the 70's, and America has the cheapest steel in the world. Thyssen Krupp is selling hot rolled coils for 700 euros a ton, that's almost $1200. Severstal, Essar and ArcelorMittal would not be buying if they didn't see profits.
|
|
atoddh
|
|
|
05-10-08 7:41 PM
|
acme:Esmark is running out of cash with every payroll.Clearly Mittal is holding them and Essar up.Do you think Essar wants W-P that badly? Will they pay off Mittal to get it? If Mittal was mad about lack of due diligence by Esmark why wait until now.
|
|
acmecoke1
|
|
|
05-09-08 10:43 PM
|
This is really a "grudge" suit by ArcelorMittal because they were forced to sell Sparrows Point in the first place. They really wanted to sell Weirton, but the Justice Department turned that idea around. When the third party of the Esmark deal pulled out (and the union was still unsettled) the Justice Department pulled the plug. Being pressured to sell, ArcelorMittal was forced to sell Sparrows Point to the only company that was interested-Severstal. In doing so, they did not get top dollar and they are now trying to extort it through the American courts. This is their corporate policy. They did it in forming ArcelorMittal, stealing DOFASCO from ThyssenKrupp and are currently suing U.S. Steel for mining rights that they acquired in the Stelco deal. Hopefully Essar will see through this nonsense and go forward with the Esmark purchase. However, Esmark will have to pay through the nose to defend itself from ArcelorMittal's endless ability to spend millions on lawyers.
|
|
acmecoke1
|
|
|
05-09-08 10:43 PM
|
This is really a "grudge" suit by ArcelorMittal because they were forced to sell Sparrows Point in the first place. They really wanted to sell Weirton, but the Justice Department turned that idea around. When the third party of the Esmark deal pulled out (and the union was still unsettled) the Justice Department pulled the plug. Being pressured to sell, ArcelorMittal was forced to sell Sparrows Point to the only company that was interested-Severstal. In doing so, they did not get top dollar and they are now trying to extort it through the American courts. This is their corporate policy. They did it in forming ArcelorMittal, stealing DOFASCO from ThyssenKrupp and are currently suing U.S. Steel for mining rights that they acquired in the Stelco deal. Hopefully Essar will see through this nonsense and go forward with the Esmark purchase. However, Esmark will have to pay through the nose to defend itself from ArcelorMittal's endless ability to spend millions on lawyers.
|
|
atoddh
|
|
|
05-09-08 7:52 PM
|
uncommon:This suit will really "throw a shoe in the works." Do you think Mittal wants W-P now? Esmark will run out of cash if they do not sell soon and W-P will have to shut down. At that point the operation will go for very little and may be viewed as just assets allowing a "new company" to be formed with new hires and no union contract. Perhaps that is the plan?
|
|
UNCOMMONSENSE
|
|
|
05-09-08 7:04 PM
|
Mittal is now eyeing a Chinese steel company, so it is clear that they have every intention of destroying the US steel industry! In October, they bought 37% of Hunan Valin Steel Tube & Wire and are currently trying to purchase Chinese steel giant Bayi Steel.
|
|
atoddh
|
|
|
05-09-08 4:07 PM
|
Mittal must see an opportunity for some extra cash in the W-P sale to Essar. The suit will probably make the price of W-P higher for any buyer.
|