US steelmaker Esmark Inc has rejected a $670 million takeover offer from Russia's OAO Severstal, following a sweetened $19 a share offer by Essar Steel Holdings Ltd.

Essar's revised offer of $19 a share values Esmark at $750 million against Severstal's $17 a share which values it at $670 million.

Esmark's management had also endorsed Essar's initial offer of $17 a share which Severtal equalled. The Russian firm also  offered better terms acceptable the United Steelworkers union.

Essar, which had already extended a $110 million loan to Esmark to avoid a potential default, also offered to invest $525 million in capital improvements in Esmark's Ohio and West Virginia plants over the next five years.

Esmark's board of directors said it was not convinced of Severstal managing to close the deal. The board also cautioned shareholders against selling shares to Severstal.

Esmark said the Severstal offer was inadequate and called for better bids, including from fresh bidders.

"We continue to invite bidders, including Severstal, to provide a superior proposal to that of Essar," Esmark's chairman and chief executive James Bouchard said.

Esmark, meanwhile, projected a second-quarter earnings of 35 cents to 45 cents per share, against the first-quarter loss of 40 cents per share.

Essar also equalled  Severstal's projections of value creation and operational synergies to win over shareholders.

Both Essar and Severstal also have agreed to assume $400 million in debt.

Esmark, meanwhile, filed a grievance with the National Labor Relations board, complaining against USW's ``misuse'' of worker-protection contract provisions to improperly try to block the sale.   

The union's current contract, which expires on 1 September, gives workers time to produce a counteroffer to a proposed change in ownership.

Esmark's largest shareholder Franklin Mutual Advisers Llc, which holds 60.4 per cent of Esmark's equity had also supported the offer by Severstal.

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

In its letter to Esmark Board, Essar also 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.