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United States Steel Corp. said Sunday that it rejected a $7.3 billion buyout proposal from rival Cleveland Cliffs and was reviewing “strategic alternatives” after receiving several unsolicited offers.
Pittsburgh-based U.S. Steel said it rejected the offer because Cleveland-Cliffs was pushing it to accept the terms without being allowed to conduct proper due diligence.
“At this juncture, we cannot determine whether your unsolicited proposal properly reflects the full and fair value of the Company. For all of the above reasons, the Board has no choice but to reject your unreasonable proposal,” U.S. Steel CEO David Burritt said in a letter, released Sunday, to Cleveland Cliffs CEO Lourenco Goncalves.
U.S. Steel employs about 4,000 workers in Indiana at multiple plants, including at the Gary Works, its largest plant. Cleveland-Cliffs, which acquired ArcelorMittal—including its Indiana Harbor and Burns Harbor mills—in 2020, has about 7,000 employees in northwest Indiana.
Cleveland-Cliffs announced earlier Sunday that it had made an offer valuing the U.S. Steel at $7.3 billion, based on $17.50 a share in cash and 1.023 shares of Cliffs stock. Cleveland-Cliffs said the value of the offer was $35 a share, a premium over U.S. Steel’s closing stock price of $22.72 on Friday. The company said it decided to reveal the private offer after U.S. Steel rejected it.
Burritt had revealed in an earlier statement that company received several unsolicited offers and had launched “a comprehensive and thorough review of strategic alternatives.” U.S. Steel, which said it expects to receive more proposals, said there was no guarantee that any deal would emerge from the review process.
Burritt said the offers are “a validation of U.S. Steel’s strategy” of transformation, including expanding its electric arc furnace steelmaking and finishing capabilities.
Cleveland-Cliffs said its proposal, first made on July 28, would create a company that would be among the 10 biggest steelmakers in the world and one of the top four outside of China. Cleveland-Cliffs CEO Lourenco Goncalves said in a statement that the proposal would create “lower-cost, more innovative and stronger domestic supplier for our customers,” and that he stands ready to engage on it despite U.S. Steel’s rejection.
Goncalves said the company’s offer has the support of the United Steelworkers union, which has 14,000 members at Cleveland-Cliffs and 11,000 at U.S. Steel. In a letter of support posted to the company’s website, the union said the company was “in the best position to ensure that U.S. based manufacturing remains strong in this country” and praised the company for not cutting union jobs when it acquired AK Steel in 2019 and ArcelorMittal in 2020.
Cleveland-Cliffs is the largest producer of flat-rolled steel and iron in North America. U.S. Steel has been a symbol of industrialization since it was founded in 1901 by J.P. Morgan, Andrew Carnegie and others, though its stock price has struggled in recent years as steel prices have fluctuated.
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