Esmark Inc., the subject of a takeover battle between India's Essar Steel Holdings Ltd. and Russian producer OAO Severstal, has filed claims against the United Steelworkers, saying the union violated U.S. labor laws.
The union supports the deal with Severstal, which closed on an $810 million acquisition of the Sparrows Point steel mill in Baltimore County last month. Esmark had also attempted to buy Sparrows Point but couldn't come up with the financing.
Esmark says that the steelworkers union has committed "multiple violations of federal labor law" in connection with claims it can block Essar's proposed $750 million takeover of Esmark, the West Virginia-based steelmaker said yesterday.
Severstal's June 5 bid won the support of Esmark majority shareholder Franklin Mutual Advisers LLC because it is favored by the company's main union. Under Esmark's current labor contract, it can't sell itself to Essar without rank-and-file support, the USW has said. Franklin is a unit of Franklin Resources Inc.
Essar, India's fourth-largest steelmaker, said yesterday that it plans to raise its offer for Esmark by 12 percent to about $750 million to thwart a bid by Severstal.
Essar intends to increase its offer to $19 a share from $17 once the two companies sign a merger agreement, the Mumbai-based company said yesterday in an e-mailed statement. Essar also said it's prepared to negotiate a new collective labor agreement with the United Steelworkers union.
Both steelmakers have been expanding in the U.S., where a shortage of the metal pushed prices of steel sheet to a record $1,020 a ton in May. Since March, Severstal has agreed to spend a combined $950 million to buy Sparrows Point and WCI Steel Inc., based in Ohio. Last year, Essar bought two plants in North America.