The Indian conglomerate planning to merge Stelco and Algoma into a new Canadian steel company is refusing to surrender its dream despite being defeated in bids for both companies.
Essar Global announced this week it has signed a deal with the United Steelworkers in Sault Ste. Marie to negotiate a framework deal to acquire Algoma through a subsidiary called Ontario Steel Investment Limited.
Gaining support of the union is a requirement for a successful bid for both struggling steelmakers. Essar is the union’s preferred bidder because it has promised to maintain jobs, pay up pension deficits and restore retiree health benefits. A competing bid by a New York-based hedge fund, however, is said to have rejected paying off pension shortfalls in favour of higher returns for debt holders.
It also envisions combining the legacy companies into a new firm.
The offer by KPS Capital Partners has been recommended to Superior Court by Algoma’s creditors, but a hearing to approve that recommendation has been postponed amid rumours KPS has dropped out of the bidding for Algoma and will end its bid for Stelco.
A spokesperson for the hedge fund did not return multiple calls and emails seeking comment.
In a news release Tuesday Ontario Steel said it will assume all employer liabilities under Algoma’s pension and retiree health benefits plans and will continue benefits coverage for active and retired employees. The company will also pay outstanding taxes owed to The Sault and accept environmental liabilities for its land.
In its statement, Ontario Steel said serving the union’s “Holy Trinity” of jobs, pensions and health benefits is the only way to ensure a competitive company.
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