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US Steel on Sunday rejected a $7.3bn acquisition bid from rival Cleveland-Cliffs, the largest North American producer of flat-rolled steel, hours after it said it had hired financial advisers to evaluate offers for the company.
Cleveland-Cliffs said it proposed a shares-and-cash acquisition for a total of $35 per share of US Steel stock, representing a 43 per cent premium on US Steel’s closing price of $22.72 on Friday, but that the offer was rebuffed. US Steel was valued at $5bn at Friday’s closing price.
Earlier on Sunday, US Steel said it was considering strategic options and had already received multiple unsolicited bids that ranged from the possible acquisition of the whole company to specific assets.
Cleveland-Cliffs chief executive Lourenco Goncalves said in a statement he hoped to continue to engage with US Steel on a possible deal. US Steel declined to comment on the offer on Sunday.
The acquisition would create the only US steel company to be a top 10 producer in the world, Cleveland-Cliffs said.
Ohio-based Cleveland-Cliffs has been a major steel acquirer 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 $1.4bn in a shares-and-cash deal.
A year earlier, Cleveland-Cliffs acquired US steel producer AK Steel for $1.1bn.
Cleveland-Cliffs said it has support from the United Steelworkers’ union to acquire US Steel and that the union has said “it will not endorse anyone other than Cliffs for a transaction”.
Pittsburgh-based US Steel has been a symbol of US manufacturing since it was formed in 1901. Financier JP Morgan bought it from Carnegie and combined it with a rival to form “the nucleus” of the company.
The company says that its steel helped build Chicago’s Willis Tower and the United Nations Building in New York, as well as supplying hundreds of millions of tonnes of steel for the US military during world war two.
Bur US Steel has struggled in recent years, and its share price has diverged from Cleveland-Cliffs. US Steel’s share price is down 24 per cent from five years ago and lags an S&P materials benchmark index. Cleveland-Cliffs’ share price is up 42 per cent from five years ago.
In US Steel’s quarterly financial report on July 28, the company said chief executive David Burritt adopted a stock sale plan on June 6 that will sell only if shares trade at a minimum of $49.87, according to VerityData.