After Wheeling-Pittsburgh reaffirmed its plans to merge with Brazilian steelmaker Companhia Siderurgica Nacional SA (CSN) on Wednesday, Illinois-based steelmaker Esmark Inc. sweetened its competing proposal to take over Wheeling Pittsburgh, offering to ask a new board of directors to issue $200 million in new stock to existing shareholders at a discounted price, rather than simply buying out current investors.
Esmark's improved offer is in response to shareholders' concerns that both Esmark's and CSN's offers undervalue Wheeling-Pitt's assets. Wheeling Pitt says it will evaluate Esmark's offer once it receives a copy.
Wheeling-Pitt announced Wednesday that it would agree to merge with CSN, despite some shareholders' objections. The United Steelworkers union in particular has vowed to fight the CSN merger and invoke a labor contract clause that allows the union to reject any deal that changes the controlling interest. Under the proposed merger deal with CSN, CSN would take 49.5 percent ownership of the new company, while Wheeling-Pitt shareholders would control the remaining 50.5 percent.
CSN will provide a $225 million, 9 percent interest loan to the new company, which would convert to 11.8 million shares, or 64 percent of the new company. However, if the union rejects CSN's eventual ownership, the $225 million will become a company debt.
Wheeling-Pitt argues that the merger deal with CSN will provide capital for necessary upgrades and a steady source of slabs. However, Esmark has countered with its assertion that it has arranged a six-year
slab supply agreement with Duferco International
Trading Holding Limited and Industrial Union of Donbass.
The agreement to merge with CSN must still be approved by Wheeling-Pitt's shareholders in a vote that is not expected until January. Shareholders also have a chance to reject the plan at the Nov. 17 annual meeting by voting in a new board of directors backed by Esmark.