OREANDA-NEWS. June 26, 2008. Esmark Board of Directors Recommends Severstal’s Amended Offer to Shareholders.

OAO Severstal (LSE: SVST; RTS: CHMF; “Severstal”, “the Company”), one of the world's leading metals and mining companies, today announced that it has entered into a definitive merger agreement to acquire Esmark Incorporated (NSDQ: ESMK; “Esmark”), a manufacturer and distributor of flat rolled and other steel products. Under the terms of the merger agreement, Severstal will increase the purchase price in its previously announced tender offer for Esmark common shares to \\$19.25 per share in cash and Esmark’s Board of Directors will recommend that Esmark’s shareholders tender their shares to Severstal. Esmark’s majority shareholder has entered into an agreement with Severstal to tender its shares in Severstal’s tender offer. Severstal is also announcing the extension of the expiration date of its tender offer for Esmark shares to July 18, 2008.

The offer has a total equity value of approximately \\$775 million and is expected to be accretive in 2009 based on current projections of costs and prices. In addition to the merger agreement, Severstal has entered into an agreement to purchase Esmark’s aggregate \\$110 million term loan facilities from Essar Steel Holdings Ltd.

Upon successful completion of the tender offer and the merger, Severstal will acquire all of Esmark’s businesses, including:
Wheeling-Pittsburgh Steel Corporation (“Wheeling Pitt”)
Esmark Steel Services Group, Inc. (“ESSG”)
Remaining 50% ownership of the joint venture Mountain State Carbon, a blast furnace coking coal production facility in West Virginia

Severstal has entered into an agreement that satisfies the successorship clause of the United Steelworkers’ (“USW”) collective bargaining agreement.

Severstal’s operating and restructuring plan, including its five year capital investment program, is designed to derive maximum value from Esmark through operational improvements, including:
Maximization and optimization of Electric Arc Furnace production;
Upgrades to enhance the quality and capacity of the Hot Strip Mill;
Improvement of downstream operations, and;
Leveraging synergies and geographical alignment between North American assets

By utilizing its management expertise and experience to successfully unlock Esmark’s potential, Severstal expects this acquisition to play a critical role in its North American industrial strategy. The combined company creates one of North America’s leading producers of flat rolled steel and expands Severstal’s product offerings to its customers.

The Company expects to realize substantial synergies with its current U.S. operations in Dearborn, Michigan and Columbus, Mississippi. The addition of Esmark to Severstal’s US portfolio also offers significant operational and financial synergy potential with recently acquired Sparrows Point in Baltimore, Maryland and the Warren, Ohio based WCI Steel (pending closure). In addition, full ownership of Mountain State Carbon will increase the Company’s vertical integration within the US market and further solidify its raw material supply base.

Alexei Mordashov, CEO of OAO Severstal, commented, “We’re pleased that Esmark’s Board of Directors has recognized the value of our offer and has recommended our proposal to its shareholders. In addition to creating value for Esmark’s shareholders, this acquisition positions Severstal as one of North America’s leading integrated steel companies. This deal is an extension of the progress that began with our acquisition of Rouge Industries in 2004 and that has continued through to our recent purchases of Sparrows Point and consistent with our agreement to purchase WCI Steel. With Esmark as part of our US portfolio, we’re well positioned to provide domestic supply to a market that has a consistent demand for high quality steel.”

Gregory Mason, CEO of Severstal International and COO of OAO Severstal, commented, “Severstal has the skills and experience to achieve the industrial synergies from our North American plants. This transaction benefits not only Severstal and Esmark, but all stakeholders and most importantly the people, the core of our company, and their communities.”

Under the terms of the merger agreement, Severstal will amend its tender offer to increase its offer price to \\$19.25 per share and Esmark will amend its Schedule 14D-9 to include the Esmark Board of Director’s recommendation that Esmark shareholders tender their shares to Severstal pursuant to the amended tender offer. A revised offer to purchase will be distributed to Esmark shareholders, and the scheduled expiration date for the amended tender offer is 12:00 midnight, Eastern Daylight Time, on July 18, 2008, unless extended. The offer and related transactions contemplated by the merger agreement are subject to the satisfaction of customary closing conditions.

Merrill Lynch is acting as lead financial advisor, Citi is acting as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel, to Severstal. MacKenzie Partners, Inc. is acting as Information Agent for the tender offer.