Mumbai: Essar Steel Holdings Ltd will raise its offer by $2 to $19 per share for US steel company Esmark Inc, trumping a bid by rival suitor OAO Severstal of Russia.

Essar Steel Holdings, a part of Essar Global Ltd, yesterday informed the Esmark board of directors that it intents to increase its offer to purchase all of the outstanding shares of Esmark.

The move comes amidst opposition from both the United Steelworkers union and Esmark's largest shareholder who controls over 64 per cent of the US steelmaker.

Essar said it will increase its offer from the earlier $17 a share to $19 per share upon execution of the merger agreement.

Essar, which made its first offer on 30 April to acquire all outstanding shares of Esmark for $17 per share, had also extended a $110 million loan to help Esmark avoid default.

Severstal, which is controlled by billionaire Alexei Mordashov, matched Essar's $17 per share offer for Esmark, which owns steelmaker Wheeling-Pittsburgh.

Esmark's largest shareholder Franklin Mutual Advisers Llc, which holds 60.4 per cent of Esmark's equity and its powerful workers union in the US and Canada, USW, rejected Essar's offer and instead supported the offer by Russian steel giant OAO Severstal.

Under a contract with Esmark, which is set to expire on September 1, the USW union has the right to veto any deal that changes management control of Esmark.

The union said Esmark and Essar wouldn't be able to close their transaction unless Essar initiated a new labor agreement with the United Steelworkers.

Essar had previously informed Esmark that it was willing to recognise the United Steelworkers, assume the basic labour agreement and negotiate a new negotiated deal with the workers.

Essar had also proposed a capital expenditure of around $525 million for Esmark's Ohio and West Virginia manufacturing facilities over the next five years.

In its letter to Esmark Board, Essar sought a level playing field for the bidders and urged the management to take steps aimed at bringing maximum value to shareholders.

Along with the acquisition of the 4 MTPA Algoma Steel Plant in Canada, and Minnesota Steel in the US which controls vast iron ore reserves, the Esmark acquisition will help Essar bring greater synergies in its American operations.

While providing real benefits to Esmark workers, their families, and to the communities where they live and work, the integration of Esmark into Essar's North American facilities will ensure security of supply of raw materials, according to Essar.