U.S. Steel rejects $7.3B buyout offer from Cleveland-Cliffs

U.S. Steel has rejected an unsolicited $7.3 billion buyout offer from its rival Cleveland-Cliffs that would have significantly changed the shape of the steel industry, according to the two companies.

Pittsburgh-based U.S. Steel said Sunday that it rejected the buyout proposal and was reviewing “strategic alternatives” after receiving several unsolicited offers.

Cleveland-Cliffs publicly announced Sunday night a previously private offer that it had presented to the board of the U.S. Steel Corp. on July 28.

That offer, which was reiterated in writing to the U.S. Steel Board on Aug. 11, proposed acquiring 100% of the outstanding stock of U.S. Steel for a per share value of $17.50 in cash and 1.023 shares of Cliffs stock.

On July 28, this implied a total consideration value of $35 per share of U.S. Steel stock, which represented a 42% premium to U.S. Steel’s share price as of the market close on July 28.

As of the close of market on Aug. 11, this offer represented a 43% premium to U.S. Steel’s share price.

Shares of U.S. Steel jumped more than 30% and shares of Cleveland-Cliffs rose 10% by Monday afternoon.

Cliffs’ offer was rejected as being “unreasonable” by the board of U.S. Steel via a letter Cliffs received Sunday, according to Cliffs.

After the offer was rejected, Cliffs wanted to make its offer publicly known for the direct benefit of all of U.S. Steel’s stockholders and also make it known that Cliffs stands ready to engage on this offer immediately, according to Lourenco Goncalves, chairman, president and CEO of Cliffs.

He said under the terms of the United Steelworkers’ (USW) collective bargaining agreement with U.S. Steel, the USW has the right to counter this proposal. On this matter, the USW has affirmed in writing to Cliffs that it endorses the transaction and will not exercise this right.

“Although we are now public, I do look forward to continuing to engage with U.S. Steel on a potential transaction, as I am convinced that the value potential and competitiveness to come out of a combination of our two iconic American companies is exceptional,” Gonclaves said.

In addition, based on review by outside counsel, Cliffs believes the proposed transaction would receive regulatory approval in a timely manner, he said.

The United Steelworkers (USW) international president said on Monday that the union supports Cleveland-Cliffs’ bid to acquire U.S. Steel.

“Cliffs is committed to the blast furnace segment of the steel market and U.S. Steel is not,” Thomas Conway, the union’s international president, told Reuters. “I think they are committed to the steel industry and success.”

Shawn Coffey, union president of AEIF IAM Local 1943 at Middletown Works, told the Journal-News that he didn’t have “enough details” to comment on the proposal.

Cleveland-Cliffs purchased AK Steel in Middletown for $1.1 billion in 2020. After that the Cleveland-based company bought the U.S. assets of ArcelorMittal for $1.4 billion, making it the largest flat-rolled steel producer in North America, officials said.

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