CLEVELAND — 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.
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.
As of the market's closing time on Aug. 11, the offer allegedly represented 43% of U.S Steel's share price. After being denied the offer, Cleveland' Cliffs stated that they "felt compelled to make its offer public known for the direct benefit of all of U.S. Steel’s stockholders and also make it known that Cliffs stands ready to engage on this offer immediately."
Below is the full statement from Lourenco Goncalves:
"On July 28th I approached U.S. Steel’s CEO and Board with a written proposal to acquire U.S. Steel for a substantial premium, valuing the company at $35.00 per share with 50% cash and 50% stock. After two weeks without any substantive engagement from U.S. Steel with respect to the economic terms contained in our compelling proposal, U.S. Steel’s board of directors rejected our proposal, calling it ‘unreasonable.’ As such, I believe it necessary to now make our proposal public to help expedite substantive engagement between our two companies. Although we are now public, I do look forward to continuing to engage with U.S. Steel on a potential transaction, as I am convinced that the value potential and competitiveness to come out of a combination of our two iconic American companies is exceptional.
"The numerous benefits we are excited about include the combination of our complementary U.S.-based footprint, our ability to leverage our in-house metallics capabilities, and enhancing our shared focus on emissions reduction. With these benefits, combined with our experience of extracting meaningful synergies from previous acquisitions, we expect to create a lower-cost, more innovative, and stronger domestic supplier for our customers across all segments. Furthermore, the transaction provides immediate multiple expansion to U.S. Steel stockholders, while simultaneously de-risking U.S. Steel’s future capital spend with our substantial expected free cash flow and very healthy balance sheet. We also plan to ramp up capital returns to shareholders and implement a dividend upon completion of the transaction.
"Most importantly, our proposal has the full support of the United Steelworkers union. This is a testament to our unwavering commitment to our employees -- which would number approximately 40,500 pro forma for the transaction -- as well as to the communities in which we operate. We have proven in our previous M&A transactions our strong track record of significant value creation and our ability to grow the business through the addition of thousands of union jobs. Finally, with this transaction we will create the only American member of the Top 10 steel companies in the World, joining a select group of just three other companies outside of China -- one European, one Japanese and one Korean. We believe that having Cleveland-Cliffs as a world-class, internationally competitive steel company is critical for our country to retain its economic leadership and to regain its manufacturing independence."