- Provincial government said to reject Essar’s requests
- Union supported bid, was unaware government not in support
Essar Group’s bid for U.S. Steel Canada Inc. was rejected after the Ontario government refused regulatory changes the Indian conglomerate wanted to get the deal done, according to people familiar with the matter.
The decision has put the provincial Liberal government at odds with Essar and the United Steelworkers union.
Ontario last week told U.S. Steel Canada, the former unit of U.S. Steel Corp. in creditor protection, that it wouldn’t support requests made by Essar to bolster its bid. Essar asked for assurances ranging from financial aid to relief on environmental regulations, pension obligations, and other issues, said the people, who asked not to be identified because the matter is private.
That decision resulted in Essar being eliminated from the bidding process, because the province said it would no longer negotiate with the potential suitor, one of the people said.
Essar’s elimination riled United Steelworkers, which said Monday in a statement that it preferred the Indian company’s bid over one from New York-based hedge fund KPS Capital Partners Inc. At least one other bidder, U.S. hedge fund Bedrock Industries, is also still involved in the process, people familiar with the matter said.
“While the government has had multiple meetings as part of the court-supervised sales process related to US Steel Canada, this process also includes certain confidentiality requirements and we must respect those requirements,” Kelsey Ingram, a spokeswoman for the Ontario Minister of Finance Charles Sousa, said via e-mail, declining to comment further. Representatives for U.S. Steel and KPS declined to comment. Representatives for Bedrock didn’t respond to requests for comment.
Essar’s elimination from the bidding was first reported by The Hamilton Spectator.
It’s not the first time an Essar bid has come up against opposition in Canada.
In May, Essar was blocked by the Ontario Superior Court of Justice from bidding for Essar Steel Algoma Inc., which it bought in 2007 but is currently under creditor protection, according to people familiar with the matter. The court based its decision on worries about Essar’s ability to finance the transaction.
KPS was instead named preferred bidder for Essar Steel Algoma Inc. last week, and will now go before the courts for final approval. KPS plans to combine Essar Steel Algoma with U.S. Steel Canada if both bids are successful, the people said.
Essar said it had concerns with both processes.
“Our hope is that going forward these concerns will be addressed so that all alternative bidders are properly considered and all stakeholder interests and concerns are fully addressed, especially the workers, pensioners and the communities involved,” David Ryan, a spokesman for Essar said, in an e-mail.
United Steelworkers said Essar “is more committed than other bidders to protect jobs, pensions, and retiree benefits,” at U.S. Steel Canada, and that rejecting its bid is “potentially devastating.”
United Steelworkers Ontario director, Marty Warren, said he wasn’t aware that the province made the decision which led to Essar being eliminated. The union isn’t opposed to working with other bidders if that proved to be the decision, Warren said in an interview.
“We’re not discarding any bids. Our role is to get the best contract that meets our goals of jobs and wages and security,” Warren said.
U.S. Steel Canada has two main facilities in Ontario: Lake Erie Works in Nanticoke and Hamilton Works. The former is thought to be the better of the two assets with an annual capacity of 2.7 million tons of raw steel production, according to bankruptcy court documents. Hamilton Works’ operations were permanently shut down in 2013.