US Steel rejects a $7.3 billion takeover bid from rival Cleveland Cliffs

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US Steel on Sunday rejected a $7.3 billion takeover bid from rival Cleveland-Cliffs, North America’s largest producer of flat-rolled steel, hours after announcing it had hired financial advisors to evaluate bids for the company.

Cleveland-Cliffs said it proposed acquiring stock and cash for a total of $35 per share of US Steel stock, a 43 percent premium to US Steel’s closing price of $22.72 Friday, but the offer was rejected. US Steel was valued at $5 billion at Friday’s closing price.

Earlier Sunday, US Steel said it was studying strategic options and had already received multiple unsolicited bids ranging from the potential acquisition of the entire company to specific assets.

Cleveland-Cliffs CEO Lourenco Goncalves said in a statement that he hopes to continue doing business with American Steel over a potential deal. US Steel declined to comment on the offer on Sunday.

Cleveland Cliffs said the acquisition would create the only US steel company to be the world’s 10 largest producer.

Ohio-based Cleveland-Cliffs has been one of the largest steel acquirers in North America in recent years. In 2020, it bought the bulk of the US steelmaking assets of Luxembourg-based ArcelorMittal, the world’s second-largest steelmaker, for $1.4 billion in a stock-and-cash deal.

A year earlier, AK Steel was acquired by Cleveland Cliffs for $1.1 billion.

Cleveland-Cliffs said it had support from the United Steelworkers union to acquire US Steel and that the union said “it would not endorse anyone other than Cliffs in any deal”.

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Pittsburgh-based US Steel has been a symbol of US manufacturing since its founding in 1901. It was bought by financier JP Morgan from Carnegie and merged with a competitor to form the “nucleus” of the company.

The company says its steel helped build the Willis Tower in Chicago and the United Nations building in New York, as well as providing hundreds of millions of tons of steel for the US military during World War II.

Bur US Steel has struggled in recent years, and its stock price has diverged from the Cleveland-Cliffs. US Steel’s share price is down 24 percent from where it was five years ago and is lagging behind the Standard & Poor’s materials benchmark. The Cleveland Cliffs share price is up 42 percent from where it was five years ago.

In US Steel’s quarterly financial report on July 28, the company said that CEO David Porritt approved a stock sale plan on June 6 that will only sell if shares trade at a minimum of $49.87, according to VerityData.

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