Indian steelmaker Essar Steel said Thursday it planned to acquire US steel company Esmark, valuing the deal at $1.1 billion, as it pushes ahead with an aggressive North American expansion drive. With the planned buy, Essar will have nearly seven million tons of steelmaking capacity in the United States and Canada, making it a significant North American player, the company said in a release. The proposed purchase by India's third-largest steelmaker, part of the oil- to-communications group Essar Global, is another sign of cash-flush corporate India spreading its wings worldwide. “This is one more step in realizing our global steel vision of having world-class, low-cost assets, with a global footprint,” Essar Global Chairman Shashi Ruia said in the statement. The deal comes after Essar, India's third-largest steelmaker which operates an integrated steel plant in India, bought Canada's Algoma Steel Inc for $1.63 billion and Minnesota Steel of the US for an undisclosed sum, last year. “This acquisition provides us with an excellent platform for the Canadian and North American markets,” Ruia said. Essar Steel, a unit of Essar Global Ltd, said it was offering $17 per share for Wheeling, West Virginia-based Esmark Inc, and added “the estimated enterprise value of the proposed acquisition is $1.1 billion.” Enterprise value is a measure of the theoretical takeover price which takes in market capitalization, plus debt, total cash and short-term investments. Steel prices have been climbing as a result of strong demand from India and China and other emerging countries, triggering consolidation in the global steel industry. Indian steel companies have been helping spearhead this drive as they push to become world players. The offer was “unanimously accepted” by Esmark's board and is subject to customary US government and union approvals, Essar said. Along with the cash payout to shareholders, Essar Steel agreed to lend Esmark $110 million to refinance debt and provide needed liquidity. The deal continues the aggressive expansion by cash-rich Essar Steel, which last year bought Canada's Algoma Steel Inc. for $1.6 billion and iron-ore reserves in Minnesota for $1.65 billion, and this month broke ground on a 2.5-million-metric-ton mill in Trinidad. Essar Steel had been looking for an integrated producer in the US and bid for the Sparrows Point steel mill in Maryland but was beat out by Russia's OAO Severstal. “With spiraling raw material and transportation costs, difficulty securing long-term financing commitments and the investment challenges associated with maximizing steel production capacity, we were convinced that a strategic partner such as Essar Steel was the best possible solution," he said.
