Warren Steel owner sues to get WCI

Claims it was denied chance to bid for mill

By LARRY RINGLER Tribune Chronicle
The owner of Warren Steel Holdings LLC and investors have filed a lawsuit claiming they were denied the chance to buy another Warren steel mill — WCI Steel Inc.

In a lawsuit filed June 13 in Delaware Chancery Court, Optima International of Miami Inc. and investors asked the court to block WCI’s sale to Russian steelmaker OAO Severstal and to any other buyer until an ‘‘open and competitive auction’’ for the company is held.

WCI said Wednesday the suit is ‘‘without merit,’’ noting holders of the majority of WCI shares approved the sale on May 16.

‘‘We continue to believe that this transaction with Severstal provides the most value to WCI Steel stockholders, customers, suppliers and employees,’’ the company said. ‘‘We intend to vigorously defend against this baseless action and will continue to pursue an expeditious closing of the sale, which will significantly improve the long-term prospects for the Warren facility.’’

The Steelworkers union and Harbinger declined to comment.

The suit charges that WCI directors ‘‘improperly acquiesced’’ to the owner, hedge fund Harbinger Capital Partners Master Fund I Ltd., and the United Steelworkers in signing the agreement with Severstal.

Optima said it and its partners own Warren Steel Holdings, the former CSC Ltd. special-bar mill in Warren Township that auctioned its assets in bankruptcy in 2001, plus Steel Rolling Holdings Inc. in Gibraltar, Mich.

Given the ‘‘obvious synergies and physical proximity’’ of Warren Steel Holdings, WCI and Steel Rolling, Optima said it and Ukraine-based The Privat Group proposed about June 2007 to buy WCI. Optima said it and WCI entered into a confidentiality agreement on June 29, 2007.

On Dec. 5, WCI announced Leonard Anthony as its new president, chief executive officer and board member, with orders to sell the company, Optima alleged. Optima said Anthony’s contract provided him with a ‘‘substantial incentive payment’’ upon a sale.

In announcing the Severstal agreement May 16, WCI said the Russian company would pay nearly $140 million in cash, or $3.29 per share, and assume more than $230 million debt and other obligations.

Severstal said the deal had the ‘‘full support’’ of the Steelworkers, which represents 1,100 workers at the last integrated steel mill in the former Steel Valley of Trumbull and Mahoning counties.

Optima said it offered shareholders about 23 percent more, or $172 million, and to satisfy WCI’s debts, but company directors effectively gave in to the Steelworkers, which has a successorship clause requiring a new buyer to recognize the union, and Harbinger.

Optima said Harbinger is ‘‘beholden to the union as a result of its significant investments in various steel companies in the United States.’’

WCI directors, ‘‘at Harbinger’s urging, effectively permitted the union to select the winning bidder,’’ Optima charged, adding it believes union support for its proposal is unnecessary.

Optima compared the WCI sale to the ongoing battle for Esmark Inc. owners of Wheeling-Pittsburgh Steel Corp. It said Esmark directors have refused to be swayed by the union’s successorship clause, producing higher bids for the company.

Severstal, which is backed by the Steelworkers and Esmark’s largest investor, is battling India’s Essar Steel Holdings for the Wheeling, W.Va., company. Essar recently boosted its bid to $750 million to top Severstal’s $670 million offer.



lringler@tribtoday.com