UPDATE 1-Russia's Severstal to acquire WCI Steel

(Updates with executive quotes, details, stock)

NEW YORK, May 16 (Reuters) - Russian mining and metals giant OAO Severstal CHMF.RLS said on Friday it has agreed to buy WCI Steel (WCIS.PK: Quote, Profile, Research, Stock Buzz), a steel products manufacturer, to enhance its operations in the United States.

Severstal will acquire all outstanding equity of WCI for about $3.29 per share, or $140 million cash. Severstal will also assume over $230 million of debt and other obligations.

WCI's stock had fallen during the day and closed down $2.50, or 45.45 percent, at $3.00 in over the counter trading.

The transaction is expected to close in the third quarter of 2008 amd immediately boost earnings, the companies said. WCI said the acquisition had the full support of the United Steel Workers union.

The acquisition "solidifies our position as the fourth-largest steel producer in the U.S. by raising Severstal's total U.S. capacity to just under 11 million metric tons per year," said Gregory Mason, chief executive of Severstal International and chief operating officer of OAO Severstal.

Severstal said Warren, Ohio-based WCI's total annual steel-making capacity of 1.22 million metric tons is focused on high-quality, custom flat-rolled steel.

Adding WCI will grow Severstal's North American flat-rolled steel segment for the automotive, appliance, furniture, construction and energy markets.

"During the past few months, the board of directors has carefully evaluated strategic alternatives and has concluded that the sale of WCI Steel to Severstal is in the best interests of the shareholders and will enable the Warren, Ohio, facility to prosper in the future," said WCI President and Chief Executive Officer Leonard Anthony.

Severstal's current U.S. operations are in Dearborn, Michigan; Columbus, Mississippi; and the recently acquired Sparrows Point site in Maryland. (Reporting by Steve James; Editing by Gary Hill)