Ontario Steel Investment says it signed a letter of intent with USW Local 2251 for the acquisition of Essar Steel Algoma. Ontario Steel says it will assume all employer liabilities for Essar Steel Algoma’s pension plan in return for a purchase price of US $900 million for the acquisition of the company.
Ontario Steel is a consortium of steel industry specialists which include shareholders of Essar Global. Essar Global was rejected from the Algoma bidding process due to an inability to complete a qualified bid that would result in Essar remaining a going concern.
Ontario Steel Investment says it will also pay the outstanding taxes owed to Sault Ste. Marie within six months of purchase and accept all environmental liabilities.
In a press release Ontario Steel commented on the agreement with USW Local 2251:
“We know that any steel business runs on its people; they are the lifeblood of this industry. That’s why we are working closely with the United Steelworkers Union to put plans in place that will protect jobs, pensions and benefits at Algoma. They need long term, strategic owners, which put workers in a position to do what they do best – manufacture the best steel in the world, right here in Ontario.”
“To date, the restructuring processes at both Algoma and US Steel Canada (USSC) have lacked clarity and transparency and have not served the best interests of the people. The outcomes at USSC and Algoma will affect the lives of tens of thousands of Ontarians – current workers, retirees, their families and the community as a whole. They deserve a fair and competitive processes and outcomes that serve the best interests of all stakeholders, not a select few.”
“We believe there is a better way. That’s why we want to see the USSC and Algoma processes re-opened and all alternative bidders be given a fair chance to participate. That will serve the best interests of all involved, particularly the people that depend on this industry the most.”
“Essar Global has a history of strong, constructive relations with union membership in Ontario, and we look forward to continuing that through Ontario Steel at Algoma.”
Essar Global was dismissed from the bidding for both of the companies but continues to pursue the acquisition despite its iron ore processor, Essar Steel Minnesota, entering bankruptcy protection last week.
Union workers have said they are unwilling to work out a collective agreement with the preferred bidder KPS Capital Partners and the DIP lending group. They have been joined by the Port of Algoma and holders of Essar Algoma’s junior and senior notes to block the bid by KPS.
“I see no reasonable prospect of the USW reaching an agreement with the hedge fund bidder [KPS] that the USW could recommend to its members,” Tony DePaulo, an assistant to USW District 6 director Marty Warren, said in a court filing.
The union says it has also secured an agreement with Bedrock Industries Group, to replace the current DIP financing. Bedrock is also competing against KPS for purchase of US Steel Canada.
Essar Algoma says the KPS is the best bet for the company as it nears the Debtor-In-Possession (DIP) August 31 deadline for a sale and will need to purchase raw materials for the winter. KPS has a history of turning around troubled companies and restoring them to healthy independence.
KPS also hopes to acquire US Steel Canada and merge the two companies but it does not want to take over the pension plan liabilities of either unit.
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