U.S. Steel rejects $7.3B buyout offer
NEW YORK — United States Steel Corp. said Sunday that it rejected a $7.3 billion buyout proposal from rival Cleveland-Cliffs and was reviewing “strategic alternatives” after receiving several unsolicited offers.
Pittsburgh-based U.S. Steel said it rejected the offer because Cleveland-Cliffs was pushing it to accept the terms without being allowed to conduct proper due diligence.
“At this juncture, we cannot determine whether your unsolicited proposal properly reflects the full and fair value of the Company. For all of the above reasons, the Board has no choice but to reject your unreasonable proposal,” U.S. Steel Chief Executive Officer David Burritt said in a letter, released Sunday, to Cleveland -Cliffs CEO Lourenco Goncalves.
Cleveland-Cliffs announced earlier Sunday that it had made an offer valuing U.S. Steel at $7.3 billion, based on $17.50 a share in cash and 1.023 shares of Cliffs stock. Cleveland-Cliffs said the value of the offer was $35 a share, a premium over U.S. Steel’s closing stock price of $22.72 on Friday. The shares rose $8.36, or 37%, to close Monday at $31.08.
Cleveland-Cliffs said it decided to reveal the private offer after U.S. Steel rejected it.
Burritt had revealed in an earlier statement that the company received several unsolicited offers and had initiated “a comprehensive and thorough review of strategic alternatives.” U.S. Steel, which said it expects to receive more proposals, said there was no guarantee that any deal would emerge from the review process.
Burritt said the offers are “a validation of U.S. Steel’s strategy” of transformation, including expanding its electric arc furnace steelmaking and finishing capabilities.
U.S. Steel operates Big River Steel mill in Osceola and the new Big River 2 mill under construction.
Cleveland-Cliffs said its proposal, first made on July 28, would create a company that would be among the 10 biggest steelmakers in the world and one of the top
vfour outside of China. Cleveland-Cliffs CEO Lourenco Goncalves said in a statement that the proposal would create “lower-cost, more innovative and stronger domestic supplier for our customers,” and that he stands ready to engage on it despite U.S. Steel’s rejection.
Goncalves said the company’s offer has the support of the United Steelworkers union, which has 14,000 members at Cleveland-Cliffs and 11,000 at U.S. Steel. In a letter of support posted to the company’s website, the union said the company was “in the best position to ensure that U.S. based manufacturing remains strong in this country” and praised the company for not cutting union jobs when it acquired AK Steel in 2019 and ArcelorMittal in 2020.
Cleveland-Cliffs is the largest producer of flat-rolled steel and iron in North America. U.S. Steel has been a symbol of industrialization since it was founded in 1901 by J.P. Morgan, Andrew Carnegie and others, though its stock price has struggled in recent years as steel prices have fluctuated.
According to the World Steel Association, Cleveland-Cliffs ranks 22nd globally as measured by steel production last year. U.S. Steel ranked 27th.
On a call with analysts last month, U.S. Steel’s Burritt said the company is “extremely well positioned for what we believe will be the best American steel market in a generation and to capitalize on global trends of deglobalization, decarbonization and digitization to build a stronger, more resilient and more profitable U.S. Steel.”
The 122-year-old firm had 22,740 employees worldwide at the end of last year.