US Steel is in high demand. After rejecting a $7.3 billion buyout proposal from the Cleveland-based Cleveland-Cliffs Inc. two weeks ago, U.S. Steel is now exploring multiple offers from third-party buyers. The Pittsburgh steelmaker saw its stock prices soar more than 30% on speculation of a pending sale.
The proposal by Cleveland-Cliffs would create a company that would be among the 10 biggest steelmakers in the world and one of the top four outside of China, which currently dominates global steel production. The deal, first announced on July 28, would offer $35 a share for U.S. Steel – a significant increase from its $22.50 trading price prior to the discussions. Cleveland-Cliffs CEO Lourenco Goncalves said that a tie-up between the two U.S. steelmakers would create a ‘lower-cost, more innovative and stronger domestic supplier for our customers.’
Despite this proposal, U.S. Steel saw a competing offer from the industrial conglomerate Esmark Inc. was submitted at a higher rate but withdrawn after United Steelworkers said it would throw its weight behind a Cleveland-Cliffs acquisition.
U.S. Steel has been a symbol of industrialization since its creation in 1901 by J.P. Morgan and Andrew Carnegie and is still home to two taconite plants in northeastern Minnesota, Minntac Mine in Mountain Iron and Keetac in Keewatin, as well as the Tilden Mine in Upper Michigan. The Minntac Mine is North America’s largest taconite plant. With increasing competition from Japan and China, U.S. Steel bought Big River Steel the following year as well as some minority stakes in Hibbing Taconite owned by Cleveland-Cliffs.
Since the pandemic, steel prices have more than quadrupled near the start of the pandemic to near $2,000 per metric ton by the summer of 2021, causing gridlock and supply chain issues. Steel prices have now settled to around $800 per metric ton, but this still remains at the top end of the spectrum for steel prices over the past six years. It is due to this spike in prices that Cleveland Cliffs also acquired AK Steel in 2019 and then followed a year later by acquiring ArcelorMittal USA in 2020 for $1.4 billion.
In a letter to shareholders Tuesday, U.S. Steel said it had entered into confidentiality agreements with ‘numerous’ third parties and was beginning to share due diligence information with potential buyers. It is clear from the responses from the U.S. Steel Chairman, David Burritt, and CEO David Sutherland, that taking these offers into consideration is making great strides in ensuring that the correct decision is made in the best interest of the stockholders.
Burritt and Sutherland stated that ‘once the review of the strategic alternatives is completed, the board will decide on a path forward for the company that it believes is in the best interest of U.S. Steel stockholders. We highly value you and your feedback and thank you for your continued support.’
With both Cleveland-Cliffs and Esmark making offers that promise to transform and innovate U.S. Steel, along with ArcelorMittal showing tentative interest, it would appear that profitability and innovation are high on their agenda. There is currently no clear resolution as to who may be the successful buyer, however, any of the offers would ensure that U.S. Steel remains a dominant and profitable name in the global steel industry.
Source: Finance Yahoo