November 28, 2007 Esmark Takeover Finally Complete
November 28, 2007, The Herald Star (Steubenville, Ohio), By PAUL GIANNAMORE, Business Editor
PITTSBURGH — After more than two years of work and a year of management control, Esmark’s merger with Wheeling-Pittsburgh Steel Corp. was completed in a nine-minute meeting in a conference room at the Hyatt Regency Hotel at the Pittsburgh International Airport.
Shareholders voted overwhelmingly in favor of the merger, with 93 percent of shares that voted choosing to merge Wheeling-Pitt and Esmark. With the close of business Tuesday, Wheeling-Pitt became a wholly owned subsidiary of Esmark Inc., which also owns Esmark’s steel services business as another wholly owned subsidiary. The new Esmark Inc. began trading this morning on the Nasdaq market under the symbol “ESMK.” Esmark opened the day at $19.25. W-P closed Tuesday at $19.40.
Enough Wheeling-Pitt shareholders chose to sell shares back to the company at $20 per share as part of the merger to require pro-rating of the shares. The put of stock back to the company was capped at $150 million, subject to pro-rating above that amount.
But, there were 575,654 additional shares bought under a purchase rights offering at $19 per share.
Wheeling-Pitt had 15,360,810 shares of outstanding common stock as of the Oct. 3
record date for voting on the merger.
About 11.5 million shares voted in the stockholder elections.
The merger marks the first time in decades that Wheeling-Pitt has more equity than debt,
and $167 million in working capital.
Esmark Chairman and Chief Executive officer James P. Bouchard told shareholders the
merger was the first of its kind in the United States, a “reverse hostile takeover.”
Wheeling-Pitt shareholders elected an Esmark-nominated slate as the board of directors
on Nov. 17, 2006, and Esmark, the smaller, private-owned firm, then reached agreement
on the merger with Wheeling-Pitt in March. The process began with meetings in mid-
2005 between Esmark and Wheeling-Pitt’s prior management team as the local
steelmaker searched for a strategic partner.
Bouchard praised the support of the United Steelworkers union in bringing the merger
about, and praised the board of directors.
“They stood tall in the saddle,” he said. “They did not waver.”
Bouchard expressed optimism that the new Esmark has the ability to prosper instead of
just weathering bad times.
Wheeling-Pitt started the day Tuesday with 70 percent debt and 30 percent equity,
Bouchard said. After the merger’s approval, Esmark now has 60 percent equity and 40
percent debt. He said the company had $11 million in working capital when he took the
reins in early December but now has $167 million.
“We have the flexibility to make changes,” he said. “I am very optimistic.”
He said despite predictions of a lower Gross Domestic Product and an overall down
market for steel and the credit crunch, “This company is more positive.”
“We will work with the Steelworkers and we will do something special with this
company,” he told the shareholders meeting.
Bouchard’s strategy remains to combine the strengths of his steel services center firm
with the ability to make steel to fill the orders those service centers receive.
“This company will succeed. We will make this company work. If we do not make a
profit, I will not be here next year. I am putting my job on the line,” Bouchard said.
He said the company has a new profit center in Esmark’s steel services business, and
Esmark’s directors had confidence in the merged company to the point where they
relinquished their seats to allow Wheeling-Pitt’s board to be the new Esmark Inc. board.
In a prepared statement, he said, “Today marks a long-awaited milestone for
stockholders, the employees of Wheeling-Pittsburgh Steel and Esmark, our partners at the
United Steelworkers and the hard-working people of the Ohio Valley. It’s been a
challenging year for all involved in combining our two companies, and I want to
personally thank each and every individual who contributed to making this new company
a reality. With this task now accomplished, we must combine the advantages of this new
organizational structure with the cost initiatives recently enacted at Wheeling-Pittsburgh
to generate strong, recurring profits. Equipped with a much improved balance sheet and
enhanced liquidity position resulting from this merger, we are poised to do just that. It is
a pleasure to lead our new company with a stronger balance sheet and without a going
Wheeling-Pitt had received an auditor’s statement questioning if Wheeling-Pitt would be
able to continue as a going concern, included in the third-quarter results report.
With the merger, the projected opening balance sheet of the new Esmark is expected to
show shareholder equity of more than $726 million. Shareholder equity in the third
quarter balance sheet for Wheeling-Pitt stood at $137.47 million.