On Sunday, United States Steel Corp. publicly announced the rejection of a $7.3 billion acquisition offer from its competitor, Cleveland Cliffs. This strategic move was prompted by U.S. Steel receiving multiple unsolicited offers and subsequently embarking on a thorough exploration of various strategic alternatives.
The decision to decline the proposal was firmly grounded in Cleveland-Cliffs’ insistence on immediate acceptance, bypassing the opportunity for proper due diligence. United States Steel CEO David Burritt communicated this rejection via a letter addressed to Cleveland Cliffs CEO Lourenco Goncalves, explicitly raising concerns about the proposal’s accuracy in reflecting the company’s complete value.
Cleveland-Cliffs presented their offer on July 28 with the ambitious goal of establishing a significant global steelmaker, securing a position within the top 10 on a global scale and ranking among the top four outside China. The proposal encompassed a cash component of $17.50 per share and 1.023 shares of Cliffs stock, resulting in a valuation of $35 per share. This valuation notably surpassed U.S. Steel’s closing stock price of $22.72 on the preceding Friday.
In spite of the rejection, Cleveland-Cliffs’ CEO Goncalves remains receptive to a constructive dialogue, underscoring the proposal’s capacity to foster a more robust domestic supplier base for customers, all while driving down costs. Remarkably, the proposal gained support from the United Steelworkers union, representing members of both U.S. Steel and Cleveland-Cliffs.
Diverse strategic alternatives
While U.S. Steel actively explores diverse strategic alternatives, including the potential for additional offers, the company remains steadfast in its commitment to transformation and the expansion of electric arc furnace steelmaking and finishing capabilities.
On the other hand, Cleveland-Cliffs, recognized as the preeminent North American flat-rolled steel and iron producer, tactically positions its offer as a pivotal step in bolstering domestic manufacturing. It’s noteworthy that the company’s previous acquisitions of AK Steel and ArcelorMittal have been lauded for their effective preservation of union jobs.
U.S. Steel, historically significant since its establishment in 1901, serves as an enduring emblem of industrialization. However, the company’s stock performance has encountered challenges in recent years due to the fluctuations in steel prices.