US Steel rejects Cliffs' takeover bid

Integrated steel producer US Steel has rejected an unsolicited offer to be acquired by integrated competitor Cleveland-Cliffs.

US Steel said on 13 August that its board of directors was discussing the possibility of selling the company, which is one of the largest producers in the US. Cliffs — the largest flat rolled steel producer in the US and a larger company than US Steel — said it had tabled an unsolicited offer to purchase US Steel's stock at $17.50/share and 1.023 shares of Cliffs stock, an offer it originally made on 28 July.

Cliffs' chief executive Lourenco Goncalves said the United Steelworkers (USW) union supported the move, backed up by a 3 August letter from USW international president Thomas Conway released on 13 August. The letter added that the USW will not support any other buyer of US Steel other than Cliffs.

The combined company would have steel production of 34.2mn short tons (st)/yr and would rank as the tenth largest steel producer in the world, according to a Cliffs presentation on the potential deal. It would become the largest steel producer in the US, overtaking electric arc furnace-based (EAF) producer Nucor.

The vast majority of US iron ore production would be consolidated into a single company, which, in addition to the significant consolidation of steel-producing assets, raises some potential antitrust concerns.

The domestic US steel market is around 95mn t, based on latest World Steel Association data, and analysts suggest the acquisition would give Cliffs-US Steel around 30pc of the market, without any capacity closures.

US Steel's board confirmed on 13 August that it had rejected the offer, citing unresolved issues it wished to discuss regarding stock valuation, regulatory risk and timing and the future of the combined company.

"After multiple conversations about, and our team's engagement in good faith negotiations over, the terms of the NDA [non-disclosure agreement with Cliffs], we were shocked to receive a letter on Friday, August 11th stating that you refused to sign the nearly completed NDA unless we agree to the economic terms of your proposal in advance," US Steel's chief executive David Burritt said.

Burritt called the offer "unreasonable", adding that as US Steel reviews possible acquisition avenues "we invite you to reach out to our financial and legal representatives and welcome you to join our process".

Originally an iron ore producer, Cliffs became a steel firm by acquiring integrated producer AK Steel in 2020 and then buying the bulk of ArcelorMittal's US operations in the same year, mostly consisting of integrated steel mills with some EAF facilities.

US Steel, founded in 1901, has spent the last four years reworking its steel footprint as it moves away from being an integrated steel producer. It bought in 2021 Arkansas-based independent EAF flat steel producer Big River Steel's 3.3mn st/yr mill. US Steel is building a 3mn st/yr EAF-based flat steel mill located next to Big River.

By Rye Druzin