On Sunday, United States Steel Corp. announced that it has rejected a proposed $7.3 billion buyout proposal from rival firm Cleveland-Cliffs, and was now reviewing “strategic alternatives” following its receipt of several unsolicited offers.
The Pittsburgh-based company said that it was rejecting the offer due to pressure from Cleveland Cliffs to accede to the terms of the offer without performing proper due diligence.
In a letter which was released on Sunday, U.S. Steel CEO David Burritt said to Cleveland Cliffs CEO Lourenco Goncalves, “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.”
Earlier Sunday, Cleveland Cliffs had announced it had made its offer based upon a valuation of US Steel at $7.3 billion, based on $17.50 a share in cash and 1.023 shares of Cliffs stock. The offer worked out to a value of $35 per share, which was a 54% premium over the company’s Friday closing price of $22.72.
In an earlier statement Burritt revealed that his company was in receipt of several other unsolicited offers, and was launching “a comprehensive and thorough review of strategic alternatives.” The company noted that even though it expects to receive still more proposals, there is no guarantee that there will be any deal which emerges following the review process.
Burritt called the offers “a validation of U.S. Steel’s strategy” of transforming the company, including its expansion of its electric arc furnace steelmaking and finishing capabilities.
Cleveland-Cliffs noted that its proposal, which was first offered on July 28th, would have produced a company that would have been one of the 10 biggest steel makers in the world, and among the top four which are not located in China.
In a statement, Cleveland-Cliffs CEO Lourenco Goncalves noted the proposal would create “lower-cost, more innovative and stronger domestic supplier for our customers,” and that he remains prepared to engage on it, even in spite of US Steel’s rejection.
Goncalves noted the offer was supported by the United Steelworker’s union, which oversees the interests of 14,000 workers at Cleveland-Cliffs, and another 11,000 workers at US Steel. The union posted a letter of support to the company’s website which said praised the company for not cutting union jobs after acquiring AK Steel in 2019, and ArcelorMittal in 2020, and noted the company was “in the best position to ensure that U.S. based manufacturing remains strong in this country.”
Cleveland-Cliffs is the largest producer in North America of flat-rolled steel and iron, while US Steel has been a bedrock of US industry since it was founded in 1901 by J.P. Morgan, Andrew Carnegie, and others.
