Esmark, USW Arbitration Set Wednesday

By PAUL GIANNAMORE
The United Steelworkers and Esmark plan to head into a grievance procedure Wednesday regarding the union’s belief that the steel company violated its Wheeling-Pittsburgh Steel Corp. contract.

The USW says Esmark entered into agreements with Essar Steel Holdings Inc. without allowing the USW time provided in the contract to mount a competing bid.

Esmark said in a filing with the Securities and Exchange Commission that the arbitration is to take place Wednesday with a decision to come no later than Saturday.

Esmark, meanwhile, has filed an unfair labor practices charge against the USW, alleging the union is interfering in the company’s attempt to be sold to Essar. Esmark contends no transaction between itself and Essar may commence until Monday. The union position is that Esmark entered into its memorandum of understanding with Essar and accepted $110 million in loans before the Steelworkers were able to mount a counter-proposal. The Steelworkers invited Russia’s OAO Severstal to consider a purchase of Esmark beginning in January.

Prior filings with the SEC by Severstal detailed that negotiations were progressing until the Esmark-Essar deal was announced April 30.

Esmark also has adopted a financial poison pill to defend against a hostile takeover and try to ensure its deal with Essar Steel Holdings Ltd. moves ahead.

Esmark rejected a $17 a share offer Thursday from Severstal, favoring a $19 per share offer from Essar. In its letter to shareholders Thursday, Esmark also noted Essar has proposed $525 million in improvements to Wheeling-Pitt mills over a five-year period, while the Severstal offer proposes $250 million.

Essar increased its offer from $17 a share to $19 a share Wednesday. The Russian company has not issued a statement since Esmark’s rejection Thursday.

Under terms of the “poison pill,” a shareholder rights agreement, Esmark would issue additional shares to existing shareholders if an acquirer purchased more than 15 percent of Esmark’s common stock. The company said the rights agreement will not apply to a tender offer or other proposal made by the USW.

“We believe the adoption of the Stockholders Rights Agreement will level the playing field among bidders and help maximize shareholder value as we move forward with the current process to sell the company,” said James P. Bouchard, chairman and chief executive officer of Esmark.