The boards of directors for Wheeling-Pittsburgh Corporation and Esmark Incorporated on March 16 jointly announced that they have entered into an agreement to combine the two companies. Subject to approval by Wheeling-Pitt and Esmark shareholders, execution of certain agreements such as a standby purchase agreement for the rights offering, and other customary regulatory approvals, the transaction is expected to be completed in the summer of 2007.
The agreement to combine Wheeling-Pitt and Esmark provides for the formation of a new company, to be called Esmark Inc. (“New Esmark”). Under the terms of the combination, existing Wheeling-Pitt shareholders will receive one share of New Esmark stock for each share of WPSC stock. Wheeling-Pitt shareholders will also be able to elect to receive on a pro-rata basis either: 1) a right to purchase, up to $200 million worth of additional New Esmark shares at $19.00 per share; or 2) a put right allowing shareholders electing that option to put back to New Esmark a shares of New Esmark stock for $20.00 per share, subject to a maximum of $150 million. The share purchase rights and put options must be exercised within 10 days of closing and both are subject to pro-ration if the elections exceed the maximum amounts specified. Esmark shareholders will receive 17.5 million New Esmark shares in the aggregate as well as additional shares in connection with any new equity raised by Esmark prior to the closing date.
The pro rata share purchase rights offer extended to existing Wheeling-Pitt shareholders provides an opportunity to invest in New Esmark at $19.00 per share. In addition, terms of the merger agreement provide that the rights offering will be back-stopped allowing the Company to raise $200 million. The put rights offered to existing Wheeling-Pitt shareholders provides those shareholders choosing that election with some protection against the prospect of New Esmark stock trading below $20 per share in the 10 day period after the closing of the merger.
On December 5, 2006, Wheeling-Pitt’s board appointed an independent committee to review, evaluate and negotiate the merger between Wheeling-Pitt and Esmark. The independent committee retained its own legal counsel and internationally recognized investment banking financial advisors. The independent committee and its advisors conducted extensive due diligence on Esmark, performed a detailed review of the Esmark proposal and evaluated the prospect for the combined company and, at the conclusion of that work, recommended approval of a proposed transaction.
New Esmark will be led by James P. Bouchard, chairman of the board and chief executive officer, and Craig T. Bouchard will be vice chairman and president. The board will be comprised of all of the existing Wheeling-Pittsburgh existing directors, and Esmark will have the right to appoint two additional directors. It is anticipated that senior management will be comprised of both existing Wheeling-Pitt and Esmark executives.
Commenting on the approval of the combination by the respective boards, James Bouchard said, “Today marks an important milestone in our vision to build the most efficient downstream steel production and distribution company in the
Bouchard noted that the proposed combination could have not reached this milestone without the full support of the United Steelworkers of America and believes that the merger is in the best interests of Wheeling-Pitt’s employees and the
Craig Bouchard added, “Once approved by shareholders, the combination of Wheeling-Pitt and Esmark will result in a company with a greatly improved capital structure and earnings potential. We are achieving strong support on Wall Street by supporting our strategic vision with blue-chip investors, the finest mill partnerships, reconstructing raw material supply relationships, and assembling a very large customer base. Our goal is to create a next-generation steel services company poised for growth.”
The chair of the Wheeling-Pitt independent committee, former Birmingham Steel (now part of Nucor) CEO James A. Todd, said, “The independent committee conducted a thorough evaluation of Esmark and believes that a combination with Esmark provides a great opportunity to build a profitable steel company. We believe that Wheeling-Pitt will benefit from Jim and Craig Bouchard’s vision to build a model downstream steel company with a strong customer focus.”
