Wheeling-Pittsburgh Steel wants to merge its operations with the North American business of Brazilian steelmaker Companhia Siderurgica Nacional, more commonly known as CSN, to form a new steel producer. The move comes as the Wheeling, W.Va.-based steelmaker is trying to fight off a hostile bid from Esmark, a Chicago-based steel distributor.

Under the deal announced with the Brazilian firm, CSN will contribute $225 million in financing; a 900,000 ton/year steel-processing facility in Terre Haute, Ind.; exclusive distribution rights for CSN's flat-rolled steel in the U.S. and Canada; and a long-term contract to supply Wheeling-Pittsburgh with steel slabs. In exchange, CNS will get a 49.5% stake in the combined company, with the remainder being held by existing Wheel-Pitt shareholders—20% of which are union employees.

Wheeling-Pittsburgh's chairman and CEO, James Bradley, says the proposed arrangement with CSN is consistent with the company's strategic plan. “It will transform Wheeling-Pittsburgh into a strong, well-capitalized steel producer with a more flexible cost structure, and broader value-added product offerings.” Mark Parr at KeyBanc Capital Markets in Cleveland says “the deal would be a tremendous strategic upgrade for Wheeling-Pittsburgh, with the slab-supply agreement allowing the company to maximize its production capability.”

Wheeling-Pittsburgh, a 2.5 million-ton steel producer, has struggled with high costs since emerging from bankruptcy in 2003, but second-quarter profit more than tripled as a result of much higher steel shipments, higher prices and lower costs.