Esmark majority shareholder throws weight behind Severstal deal

By Angela McDaniels

Tacoma, Wash., May 22 - Esmark Inc. shareholder Franklin Mutual Advisers, LLC urged the company to conclude a merger agreement with OAO Severstal rather than Essar Steel Holdings Ltd.

The 60.1% shareholder made the recommendation in a May 21 letter included in a schedule 13D filing with the Securities and Exchange Commission.

Both companies have offered $17 per share for Esmark, but Franklin Mutual noted that Severstal's proposal is supported by the United Steelworkers and has already satisfied the conditions required by the company's collective bargaining agreement. The proposal from Essar, however, was rejected by the union.

"It seems clearly the case that the USW's opposition to the Essar transaction will be difficult, if not impossible, to overcome and it is our judgment that this inescapable element of the Essar proposal, both because of the delay it will involve under the best circumstances as well as the serious level of uncertainty it poses to the ultimate consummation of the deal, represents a very significant infirmity of the Essar transaction," Franklin Mutual said in the letter.

It was previously reported that the offer from Severstal, a Moscow-based metals and mining company, is not contingent on financing, and Severstal expects to consummate the deal within 40 days after entering into a merger agreement.

Esmark is a Wheeling, W.Va., steel producer.

Essar Steel, a flat carbon steel manufacturer based in Essar, India, offered on April 30 to buy Esmark for $670 million.

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