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Severstal Buys WCI Steel for $141 Million

May 17, 2008
A potential suitor for Esmark, its partner in the Mountain State Carbon coke plant at Follansbee, has purchased Warren-based WCI Steel for $141 million.

OAO Severstal, a Russian steelmaker and ore firm, announced its agreement to buy WCI Friday.

Severstal and Wheeling-Pittsburgh Steel Corp., an operating unit of Esmark, have been joint venture partners since 2005 in operating the Follansbee coke plant.

The United Steelworkers have backed away from statements made by a union official in early April that Severstal was going to buy Esmark and neither Severstal nor Esmark have confirmed talks were under way.

However, a union letter Friday to James Bouchard, Esmark’s chairman and chief executive, indicated offers for Esmark have been made at various times since February, though a copy of the letter did not indicate who was making the offers.

Esmark has entered into loan agreements with India’s Essar Steel Holdings and has reached agreement on a $17 per share offer. The USW said Friday Esmark violated right-to-bid rights of the union in its dealings with Essar by failing to provide the Steelworkers with adequate notice. The union also reminded Bouchard a deal with Essar cannot be closed unless a contract is reached by Essar with the Steelworkers.

WCI makes custom, flat-rolled steel. Severstal also owns the former Ford Rouge Steel plant in Dearborn, Mich., and has opened a new steel mill in Columbus, Miss. Severstal recently was awarded the bid to buy ArcelorMittal’s Sparrows Point, Md., plant for $810 million. Esmark had been a partner in a venture to buy Sparrows for $1.35 billion, but that deal unraveled in December, weeks after Esmark completed its merger with Wheeling-Pitt.

ArcelorMittal has sued Esmark for $540 million, alleging Esmark and E2, the joint venture that was acquiring Sparrows Point, hid financial problems. Esmark has termed ArcelorMittal’s lawsuit “frivolous.”

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