Last week, West Virginia-based Esmark Inc. implemented a shareholder’s rights plan, also known as a “poison pill” anti-takeover measure, while the two companies bidding for Esmark continue to battle. As we discussed late last month, the interest from Russian metals-and-mining company OAO Severstal and steelmaker Essar Steel Holdings Ltd. of India springs from their desire to create a foothold in the U.S. market. Although Essar was unofficially selected for the buyout this week, the choice is not final due to disputes within the companies and Esmark’s steelworkers’ union.
While the future is still uncertain, the poison pill is activated if a company or person attempts to acquire more than 15% of Esmark’s common stock. It doesn’t apply to stockholders who already hold 15% or more or a purchase offer from the United Steelworkers, Esmark’s labor union.
“We believe the adoption of the stockholders-rights agreement will … maximize shareholder value as we move forward with the current process to sell the company,” Esmark’s Chief Executive James P. Bouchard told the Wall Street Journal this Monday.
On Tuesday, Russian steelmaker Severstal, which has support from the United Steelworkers, expressed disappointment in Esmark’s decision to reject their $17 per share cash offer in favor of the $19 per share, $750.0 million offer from Essar. The company still has faith in a potential merger, though, and Severstal Chief Executive Officer Gregory Mason wrote a letter to Esmark noting that Severstal was “best positioned to strengthen and grow Esmark’s current assets,” adding “compelling value for your shareholders through a transaction that can actually be realized.” He wrote that Essar “does not represent the same opportunities, cannot realistically be consummated, and, thus, will not deliver value to your shareholders.”
Yesterday, the United Steelworkers began arbitration with Esmark to resolve the sale of the company, which is becoming quite the dispute. A decision is expected Saturday.