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Steelworkers rain on Essar Algoma’s parade

Essar Steel Algoma ’s largest union is saying no deal to the selection of a New York hedge fund as the prospective new owner of the Sault Ste. Marie steel works. Steelworkers Local 2251 Mike Da Prat told SooToday.
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Essar Steel Algoma in Sault Ste. Marie

Essar Steel Algoma’s largest union is saying no deal to the selection of a New York hedge fund as the prospective new owner of the Sault Ste. Marie steel works.

Steelworkers Local 2251 Mike Da Prat told SooToday.com that they are rejecting KPS Capital Partners as Essar Algoma’s preferred bidder in a proposal that would see the assets of the former Stelco steel plant in Hamilton and Nanticoke merged with Essar Algoma into a single new Canadian steel producer.

Instead, Da Prat and five other members of the union executive have signed a letter of intent to negotiate with Ontario Steel Investments Ltd., a new company set up by Essar Global, the steelmaker’s parent company, to acquire Essar Steel Algoma and the former Stelco assets.

Essar Algoma announced in June that it had entered an asset purchase agreement with a consortium of bidders headed by KPS Capital Partners, a Manhattan-based private equity firm.  

The company, which is under creditor protection, is seeking approval in an Ontario Superior Court. Finalizing the sale in August is subject to renegotiations of collective agreement and pension plans, giving the union an effective veto over any new owner.

The decision to deal with Essar Global instead of KPS was announced by Da Prat on July 11 at the first of three information meetings today with Local 2251 rank-and-file members.

"It is understood that in the event that Ontario Steel is successful in acquiring the assets from Essar Steel Algoma Inc, any renegotiated collective bargaining agreements with USW Local 2251 shall include the income from Port of Algoma Inc. and Essar Power Canada with respect to any profit-sharing component," states an agreement between the union and the new company signed July 10.

Da Prat told SooToday that the membership appears to support dealings with the Essar Global subsidiary.

"There was no vote taken, but from the comments, the members support the executive," Da Prat.

"What we're saying is, the asset purchase agreement that's going is unattainable, because one of the conditions is to get a collective agreement with 2251."

Local 2251 is now asking Ontario's Superior Court of Justice to consider other bids for Essar Steel Algoma.

A bid from Essar Global is widely reported to have been previously rejected because the Mumbai-based global giant was unable to demonstrate it had the financial wherewithal to consummate the deal.

As Essar Steel Algoma's largest union representing hourly workers, Local 2251 has been dealing with Essar since Essar bought the Sault operations in April, 2007.

Da Prat told SooToday.com he remains deeply distrustful of the insolvency court and the sales and investor solicitation process (SISP) that’s being used to seek a new owner for the Sault’s steel mill.
 “It is totally unfair. Bidders were eliminated by the process. We were not informed. Why? We were not given any rationale why.”
Da Prat was preparing a court affidavit indicating that Local 2251 objects to the process that rejected Essar Global’s bid.
He will argue that Essar Global has the wherewithal to complete a deal and that a collective agreement with the union is “do-able.” 
“We’re going to court in full support of this deal with Ontario Steel that we’ve discussed with Essar Global.”