Companhia Siderurgica Nacional (CSN) and Wheeling-Pittsburgh Corporation on November 15 announced that CSN has offered an enhancement to its existing agreement with Wheeling-Pittsburgh. The board of Wheeling-Pittsburgh has received and endorsed the new proposal as the best alternative currently available to the company and its shareholders.
Under the agreement and plan of merger previously announced on October 24, the parties agreed to a merger of Wheeling-Pittsburgh with a subsidiary of CSN, as a result of which the Wheeling-Pittsburgh shareholders would receive 50.5 percent of the combined entity and CSN would own the remaining 49.5 percent. The combined entity would be known as Wheeling-Pittsburgh Corporation. CSN also agreed to contribute $225 million in cash through the issuance by the combined company of a convertible debt security.
Under the enhanced proposal, for each share of Wheeling-Pittsburgh Corporation, shareholders will have the choice of electing to receive either:
i) a share of common stock in the new combined company ("A Share");
ii) a depositary share that requires CSN to pay $30 per share in cash four years after the merger ("B Share"); or
iii) a combination of A and B Shares. Each B share will represent the same class of common stock as the A Share that is deposited with a depositary and will be subject to a mandatory purchase by CSN for $30 per share on the fourth anniversary of the merger. The total number of B Shares will be limited to 50 percent of the total of A and B Shares issued in the merger. The B shares will be listed for trading on the NASDAQ. CSN and the company are in discussions to finalize the enhancement, subject to an amendment of the existing definitive agreements.
James G. Bradley, chairman and CEO of Wheeling-Pittsburgh stated, "The existing proposal represented the best strategic option for Wheeling-Pittsburgh shareholders at the time, continues to provide our shareholders an opportunity to realize significantly greater value, and positions Wheeling-Pittsburgh for future success. This enhanced proposal improves upon the previous proposal by providing the benefit of choice to shareholders and expressing the confidence that CSN has in this combination. Both CSN and the company believe that the combined company will create significantly enhanced value going forward, and this alternative provides shareholders an opportunity to cash in on some of that value today at a significant premium to the current stock price if they so choose. Since this company emerged from bankruptcy just over three years ago, our employees have worked hard and with full commitment to making Wheeling-Pittsburgh a success. CSN's enhanced proposal validates the extent of our employees' contributions and the great strides this company has made in a relatively short period of time."
Marcos Lutz, CSN’s managing director for infrastructure and energy, said, "We firmly believe in the value creation underlying the combination of our companies and are confident that significant synergies will be achieved. We also wanted to be responsive to what we have heard from shareholders and present this revised proposal which essentially offers them an attractive cash alternative. A number of financial institutions have volunteered to monetize the B Shares for shareholders, thereby establishing a market and price for these B Shares immediately."
Bradley concluded, "The paramount focus for our board is creating shareholder value, and we are committed in pursuing the best transaction available to our shareholders. In addition to continuing to be open to bona fide third-party offers, we continue to be in discussion with CSN to improve its current offer. In such effort, we are in active discussions with CSN in which CSN would allow existing Wheeling-Pitt shareholders to participate in the economic upside of the shares underlying the $225 million convertible debt. While this aspect of discussions are in preliminary stages and many details such as tax and legal structuring need to be addressed, this is another indication of our commitment to create additional value for our shareholders and CSN's willingness to share the potential upside benefits of this combination."
Under the terms of the agreement already announced, CSN will contribute its modern steel processing facility in Terre Haute, Ind., with current annual pickled and oiled, cold-rolled and galvanized products of 1 million tons, provide Wheeling-Pittsburgh exclusive U.S. and Canadian distribution rights for CSN's flat-rolled steel products and commit to a 10-year slab supply agreement, which will provide a long-term, guaranteed supply of high-quality slabs on favorable payment terms. CSN will also contribute $225 million in cash through the issuance by the combined company of a convertible debt security that, with the consent of the United Steelworkers, can be converted into equity in three years. Of the $225 million, approximately $150 million will be used for transformative capital improvements – $75 million to build a new energy-efficient furnace that would increase Wheeling-Pittsburgh's hot strip mill capacity to 4 million tons, and the balance to add a second galvanizing line at
The company and CSN expect to file a preliminary joint proxy statement and prospectus regarding the CSN transaction with the SEC as soon as possible.
The company's annual meeting of shareholders to elect its board of directors is scheduled for November 17 at the
