AMM BOOK NOOK
By Scott Robertson
Subscribers to AMM have read for years of mergers and acquisitions in metals, efforts to consolidate the steel industry and the motives of industry magnates like Lakshmi Mittal, Alexei Mordashov, Wilbur Ross and others.
As numerous, as complex and as detailed as many of those stories are—and surely will be in the future—AMM never had a reporter sitting in a closed-door meeting with the principals when a deal was on the table.
Craig Bouchard was there. As president of the former Esmark Inc., a Chicago-based company that started in steel with service center holdings but grew steadily in influence, strength and headline-grabbing activity, he lived through the twists and turns of one of the most interesting and volatile battles the steel industry has seen.
Bouchard, together with Old Dominion University professor and economist James V. Koch, delivers a firsthand account of the roller-coaster ride that Craig and his brother, James Bouchard, took as they led Esmark from a service center consolidator to a steel industry player with the acquisition of Wheeling-Pittsburgh Steel Corp. and the subsequent sale of Esmark to Russian steel giant OAO Severstal.
In their recently published book, America for Sale: How the Foreign Pack Circled and Devoured Esmark, Craig Bouchard and Koch recount the beginnings of Esmark, its rise and decision to go after the venerable Wheeling-Pittsburgh Steel and the subsequent bidding war for Esmark between Severstal and India-based Essar Steel, a battle which ultimately more than doubled Esmark’s share price.
The book’s cover illustrates some of the story. It pictures an American eagle clutching a steel beam but surrounded by tigers and bears, essentially representing India’s Essar and Russia’s Severstal.
The book, published by Praeger, opens with a lot of economic basics that help to describe how Esmark rose in stature in steel, and includes the beliefs of Bouchard and Koch about how and why foreign investors like Severstal, fellow Russian steelmaker Evraz Group SA, Essar and Brazilian steelmaker Cia. Siderúrgica Nacional (CSN), among many others, have set their sights on the U.S. steel industry and how they have been able to gain control of more than 50 percent of American steelmaking assets.
Bouchard believes that another round of “America for sale” is coming in 2010 as the value of the dollar falls, leading more foreign companies to look to the United States to invest. The book describes in detail the dangers and risks associated with foreign ownership of U.S. steel assets, but at the same time dispels many economic myths about the manner in which deals are constructed and executed.
Much of the economic discussion in the book is elementary, although at times it becomes very detailed. The details, however, are critical to understanding Esmark’s position in the U.S. steel industry and provide some of the answers observers were seeking as the story of Esmark and its sale to Severstal developed.
It was commonplace, for example, to hear steel industry veterans ask, “How are they (the Bouchards) doing this?” or “How do they think they can pull this off?” America for Sale tells how it was done, complete with all manner of emotion and activity from quiet confidence to brashness, hard negotiation to hand-wringing, threats to compliments and back-room dealing to back-stabbing.
There is something in the book for students interested in economic lessons and for steel veterans wanting the inside story to sports fans wondering how Stanley Cup playoff hero Evgeni Malkin ended up playing with the Pittsburgh Penguins.
Among the more interesting sections of the book are stories relating how the former management of Wheeling-Pittsburgh Steel initially aligned itself with CSN against the Bouchards when Esmark first broached a takeover of the steel operations, and the dealings of the United Steelworkers union and Ron Bloom, one of its main operatives and now a key figure in the Obama administration.
Another is the alignment of the USW with Severstal even as Essar offered a higher share price for Esmark. Bouchard and Koch explore and share the reasons why they believe such an arrangement was made.
Ultimately, the authors offer a number of predictions for the future and a list of winners and losers in the battle for control of Esmark. Predictions include another wave of “America for sale” next year.
Winners include Esmark shareholders, who got more than they expected for their shares. Losers include Severstal and the USW (for now at least), given that Severstal is losing money and has had to close plants and that the USW has seen massive worker layoffs and a reduction in its all-important collection of union dues.
Readers also will be winners. America for Sale: How the Foreign Pack Circled and Devoured Esmark answers many questions and poses more. Those who read it likely will come away with a better understanding of the moods and motivations of major business leaders as they construct merger deals.
Such information could prove invaluable if Bouchard’s and Koch’s predictions of another round of “America for sale” are realized.