Call it a tale of two steel companies. One has a record of broken promises, shuttered plants and labour relations based on confrontation. The other has a legacy of investment in a struggling company, expansion and a deep commitment to its community.
The contrasts between Essar Steel, of India, and U.S. Steel, of Pittsburgh — the foreign owners of the Algoma and Stelco mills, respectively — are stark. Small wonder then that news this week Essar is a likely bidder for the Stelco plants has caused such excitement in a mill that has endured little but bad news for the last eight years.
Both companies came to Canada in 2007 — Essar bought Algoma in April and U.S. Steel acquired Stelco in August. The prices of both deals were about the same — $1.9 billion in cash and assumed debt for Stelco and $1.8 billion in cash for Algoma in Sault Ste. Marie.
That’s where the similarities end, however. Stelco was just out of a tortured two-year restructuring under creditor protection and was owned by three hedge funds anxious to take their profits and move on to the next deal. Algoma was a public company and while there had been financial trouble over the years, including two trips through court-supervised creditor protection, it was profitable and had a strong balance sheet when sold.
News of Essar’s interest in the Hamilton and Lake Erie works of U.S. Steel Canada surfaced last week after sources with direct knowledge of Essar’s business confirmed what has been widely rumoured for months.
The sources are bound by the confidentiality agreement covering USSC’s sales process.
The only confirmation of a bid is a June acknowledgement by Essar that it had signed a confidentiality agreement required as part of the bidding process for U.S. Steel Canada.
That process is now in a second stage where final bids for the Stelco assets are being evaluated by USSC’s chief restructuring officer, financial adviser and court-appointed monitor.
Essar will not confirm its bid moved to the second stage.
If the family-owned company based on Mumbai were to emerge as the new owner of the Stelco plants, what might it bring to Hamilton?
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