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Essar Steel Algoma’s largest union said it was not involved in the sale process that allowed a New York hedge fund to emerge as the best bet to take over the Sault Ste. Marie steel plant.
Local 2251 is emphatic that it “was NOT involved in the selection of KPS (Capital Partners) as a successful bidder,” said the union in a June 22 message to its members that was released to the media.
KPS is Essar Algoma’s preferred bidder in a proposal that, according to various media reports, would see the assets of the former Stelco steelworks in Hamilton and Nanticoke merged with Essar Algoma in Sault Ste. Marie into a single new Canadian steel producer.
Essar Steel Algoma announced June 17 that it has entered into an asset purchase agreement for the sale of the steel works to a consortium of bidders headed up by KPS.
The company, which is under creditor protection, is seeking approval in an Ontario Superior Court.
Finalizing the sale in August is subject to likely renegotiations of collective agreements and pension plans.
Despite being listed as one of the consulting partners in a solicitation and sale process, the union warned Essar and all stakeholders that it shouldn’t expect a ringing endorsement of the KPS offer.
“Being informed of a decision is not being involved in the making of a decision,” said the release.
Leadership at 2251 is making it clear that it won’t be backed into a corner, bound by a gag order, and forced to “enter into secret negotiations” regarding revisions to collective agreements and retirement benefit issues.
“When, and if, Local Union 2251 decides to support an offer, we will inform the members first.”
The union’s negotiating committee, which is bound by a confidentiality agreement not to discuss the proposal or the bids, added it’s not appreciative of keeping its members in the dark when “the company, on the other hand, is free to provide whatever information it wishes and they have done so through their intranet.”
The Steelworkers further panned the sales and solicitation process, which invited bids on Feb. 11 and closed April 1, saying it had been far from a “robust” process with not enough time for other bidders to come in.
Compared to past restructurings at the former Algoma Steel where the company has worked cooperatively, the union said this time, the company acted in a “unilateral” fashion.
In a bizarre plot twist, Essar Steel’s India-based parent, Essar Global, agrees with the union.
Through a news release suggesting a looming internal struggle within the Mumbai-headquartered multinational, Essar Global said it’s “disappointed” and doesn’t support the asset purchase agreement involving KPS.
“In Essar Global’s view, there has not been adequate opportunity for other potential bidders to participate in this process.”
After pumping US$800 million into the Algoma operations and shepherding the business through a severe downturn in the steel industry, Essar Global said more time should have been allowed to provide for a “better pricing environment” and better returns for stakeholders.
Essar Global pointed the finger of blame at its own steel division for entering into creditor protection last November after a fallout with Cliffs Natural Resources, its iron-ore supplier.
The Ohio miner terminated a critical raw material supply contract with Essar in October, accusing Essar of breach of contract. The matter has since been resolved.
In its release, Essar Global said “it remains committed to the Canadian steel industry” and sees the long-term value of a “world-class” steel production facility and an expanded port facility in the Sault.
Essar, controlled by the Ruia brothers of Mumbai, paid $1.85 billion to buy Algoma Steel in 2007, considered one of the lowest cost steel producers in North America.
In May, the Globe and Mail, citing anonymous sources, reported Essar Global was ruled out as a potential buyer by an Ontario Superior Court judge in charge of the restructuring.
“Given the confidentiality of the CCAA restructuring process, Essar Global can neither confirm nor deny its involvement in the bidding process.”
Essar Steel Algoma filed for creditor protection under the Companies Creditors Arrangement Act last November. Ernst & Young is the court-appointed monitor.
A similar fate has befallen Essar Steel Minnesota where the company recently lost a key long-term contract to Cliffs Natural Resources to supply steel giant ArcelorMittal with taconite ore. The proposed adjoining steel plant remains unfinished and under major public scrutiny as that state-subsidized operation heads into bankruptcy.
