Esmark's announcement came 24 hours after India's Essar Steel Holdings Ltd. sweetened its offer for the West Virginia company by $80 million, raising its bid to $19 per share, or $750 million.
While Esmark's management had endorsed Essar's initial $670 million offer in late April, the United Steelworkers union partnered with Severstal on a counteroffer.
Neither Esmark shares, meanwhile, rose 30 cents, or 1.5 percent, to $20.28 on the Nasdaq.
A statement from Esmark's board of directors said it was not convinced Severstal could close the deal. The board also decided Severstal's offer was not in the best interests of shareholders and urged them not to sell their shares to the metals and mining company.
"We continue to invite bidders, including Severstal, to provide a superior proposal to that of Essar," Chairman and CEO James Bouchard said.
Even before raising its bid, Essar had extended a $110 million loan to Esmark to avoid a potential default. It also announced Wednesday it would invest $525 million in capital improvements in Esmark's Ohio and West Virginia plants over the next five years.
Both Essar and Severstal claim they are best-positioned to create value for Esmark shareholders and secure a stable future for the mills. Esmark has operations in 20 states, including subsidiary Wheeling-Pitt plants in West Virginia, Ohio and Pennsylvania, and a plant in Greensville County, Virginia.
Both bidders also have agreed to assume $400 million in debt. Esmark has filed a grievance against the USW over its opposition to the Essar deal.
The union has yet to comment on allegations it is abusing certain provisions of its contract by improperly trying to block the sale and refusing to deal with EssarSeverstal spokeswoman Katya Pruett nor Dave McCall, District 1 director for the USW in Columbus, Ohio, immediately commented