Investors want W-P to drop merger plans
One group says it would invest up to 100 million in the company if it were permitted.
MORGANTOWN, W.Va. (AP) -- Investors who control 9.5 percent of Wheeling Pittsburgh Steel Corp. stock say the steelmaker should abandon its proposed merger with a Brazilian company, remain an independent producer and replace its senior managers.
In a letter sent to Wheeling-Pitt's board of directors and filed Friday with the Securities and Exchange Commission, Tontine Management LLC and its related affiliates said neither of two competing offers for the struggling West Virginia steelmaker offers sufficient value to shareholders.
Tontine managing member Jeffrey L. Gendell said if Wheeling-Pitt were to launch a stock offering to current shareholders only, his investors would be prepared to buy as much as 100 million worth. That would help the struggling Wheeling-Pitt raise much-needed capital on its own, without a merger and without diluting shareholder value.
"Tontine is an important investor in Wheeling-Pittsburgh Corporation. We appreciate the concerns Mr. Gendell outlined in his letter, which the Board received this morning. The Board has already contacted Mr. Gendell to begin a more active dialogue to address their concerns," Wheeling-Pitt's Board of Directors said in a statement issued Friday.
Brazil's Companhia Siderurgica Nacional officials did not immediately comment on Tontine's letter Friday. Shares closed up 66 cents, or 3.6 percent, at 19.14 on the Nasdaq Stock Market.
Wheeling-Pitt, which has survived two bankruptcies and employs some 3,100 people at plants in West Virginia, Ohio and Pennsylvania, is at the center of a takeover battle between CSN and Illinois-based Esmark Inc., a steel supplier eager to get into manufacturing.
The United Steelworkers union opposes the CSN merger, saying Esmark offers better long-term security for Ohio Valley workers.
A union official could not be immediately reached for comment on Tontine's letter. Last month, however, the USW said dealing with CSN would have required concessions workers are not willing to make, including a reduction in profit-sharing and contributions to the fund that helps pay for retiree health care.
Wheeling-Pitt has said it took 18 months to arrange the proposed deal with CSN, but Gendell said his partners are frustrated that both offers "grossly understate the intrinsic value" of the company, dilute shareholder value and relegate current shareholders to minority positions with "virtually no possibility" of gaining influence in the future.
The proposals also "have fostered an environment of stunning animosity and potentially value-diminishing behavior from critical union constituencies and have created a highly disjointed, confusing and, in all likelihood, 'market chilling' process," Gendell's letter said.