US Steel Rejects $7.3 Billion Buyout Offer from Cleveland-Cliffs
US Steel Corp., one of the leading steel manufacturers in the US, has declined a buyout offer of $7.3 billion from its rival, Cleveland-Cliffs Inc. This rejection has prompted US Steel to initiate a formal review of strategic options. Cliffs made their offer public after US Steel’s rejection and announcement of the review process.
US Steel CEO David Burritt, in a letter to Cliffs CEO Lourenco Goncalves, stated that the board believes the proposal does not adequately reflect the true value of the company. As a result, they had no choice but to reject the offer.
The news had a significant impact on the stock market, with shares of both companies seeing an increase. If the merger were to occur, it would create a global steelmaking giant and enhance competitiveness in an industry largely dominated by China.
Cliffs had proposed to pay $17.50 in cash along with 1.023 shares of its own stock for each US Steel share, representing a premium of 42% over US Steel’s closing share price on July 28, when Cliffs first reached out to the company privately.
US Steel’s declining revenue and profit declines in recent quarters have prompted Cliffs to pursue this merger in their efforts to expand their operations.
Cliffs has been actively acquiring companies in the industry, with the purchases of AK Steel Holding Corp. and the US business of steelmaker ArcelorMittal in 2020. Goncalves expressed his optimism about a potential merger, highlighting the value and competitiveness that a combination of these two iconic American companies would bring.
The offer from Cliffs has gained support from the United Steelworkers union, the largest steel industry union in North America. Cliffs has also secured debt financing from several banks in preparation for the proposed deal.
US Steel has confirmed that it has received offers from Cliffs and other interested buyers. However, the evaluation of the proposals has been challenging due to Cliffs’ refusal to engage in the customary process for assessing valuation and certainty without prior agreement on economic terms.
As the story continues to unfold, industry experts and investors are closely watching the developments between these two prominent steelmakers.