KPS withdraws from bid to buy Essar Algoma.

• Author: Ross, Ian
• Position: NEWS

The prospective buyer for Essar Steel Algoma, KPS Capital Partners, backed away from its bid to buy the Sault Ste. Marie steel plant.

Just days after the United Steelworkers (USW) Local 2251 said it wouldn't supported the selection of the New York equity firm as Essar Steel's preferred buyer, the company received word that the consortium agreement fronted by KPS had been terminated. However, the terms lenders involved in the bid still want to pursue the acquisition.

In a July 14 news release, Essar Steel Algoma said the term lenders notified them that they "remain committed" to "closing the transaction contemplated by the asset purchase agreement as soon as possible."

The steel producer, which is under creditor protection since last November, had seeking approval in an Ontario Superior Court for the consortium led by KPS to take over the operation as part of the ongoing restructuring effort.

But to finalize the sale by the end of August would require renegotiations of the collective agreement and pension plans, which gave Local 2251 an effective veto over any new ownership bid.

In rejecting the KPS proposal, the union announced on July 12 it had signed a letter of intent to negotiate with Ontario Steel Investments, a new company set up by Essar Global, the steelmaker's parent company, to combine the Sault plant with the former Stelco assets in Hamilton and Nanticoke.

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"While it is unfortunate that KPS has withdrawn from the consortium," said Essar Steel Algoma CEO Kalyan Ghosh in a July 14 news release, "I am pleased that the term lenders remain committed to closing the transaction. Algoma will work with its stakeholders to achieve the optimal outcome for the future of Algoma, its employees, pensioners and the customers we serve."

The Steelworkers had indicated their distrust of the insolvency court and the entire sales and investor solicitation process (SISP).

In a July 14 statement, the union called the developments "the latest twist in a mismanaged"...