Shares of U.S. Steel surged more than 25% Monday morning, after the 122-year-old company said it rejected a $7.3 billion buyout offer and announced it has launched a strategic review to consider selling all or part of the business.
The United States Steel Corporation plant stands in the town of Clairton on March 2, 2018 in ... [+]
The steel producer was trading at $28.47 a share as of 9:57 a.m. Monday, up from a closing price of $22.72 on Friday.
Cleveland-Cliffs, a flat-rolled steel producer, offered to buy the company in a cash and stock deal worth $35 per share, but U.S. Steel said it "was unable to properly evaluate" the offer because "Cleveland-Cliffs refused to engage in the necessary and customary process to assess valuation.”
The proposal from Cleveland-Cliffs was to acquire 100% of U.S. Steel’s outstanding stock for $17.50 per share in cash, plus 1.023 shares of Cliffs stock—valuing U.S. Steel at about $7.3 billion, significantly higher than the $5 billion valuation reflected Friday.
After U.S. Steel called the unsolicited offer "unreasonable," Cliffs went public with its proposal and said it "stands ready to engage on this offer immediately."
U.S. Steel reported its fifth consecutive quarter of profit declines and fourth of falling revenue in July with second quarter net earnings of $477 million, but President and CEO David Burritt last month said the company was “extremely well positioned for what we believe will be the best American steel market in a generation.”
Shares of U.S. Steel dropped more than 24% in the five years leading up to Friday.
Cleveland-Cliffs Northshore Mining says their iron ore pellets are environmentally friendly on a ... [+]
U.S. Steel was founded when J. P. Morgan financed the merger of steel companies owned by Andrew Carnegie, Elbery Gary and William Henry Moore in 1901. Charles M. Schwab was the first president of the company, which was once the largest steel producer in the world and was the first billion-dollar corporation. Today, U.S. Steel operates in 10 states and Slovakia and is still among the top 25 steel production companies in the world. The company saw combined losses of $1.8 billion in 2013 and 2015 before domestic steel prices rebounded. Prices briefly increased when former President Donald Trump imposed tariffs on imported steel, and surged during the pandemic. U.S. Steel has plans to close two plants in Illinois and has instead invested in "mini mills"—which melt steel scrap as opposed to creating it from raw iron ore and coke. News of the pending closure comes a few years after Trump visited Granite City, Illinois and declared the facilities to be "blazing bright."
The news of a potential sale comes just days after U.S. Steel announced it would partner with Google Cloud to use artificial intelligence technology at iron ore facilities in Minnesota. An application called MineMind is meant to improve the efficiency of equipment maintenance and reduce the amount of time to complete a work order by 20%. The initial phase of the launch will begin in September at the Minntac and Keetac facilities.
U.S. Steel Eyes Potential Sale After Several Unsolicited Bids (Forbes)
Can U.S. Steel Stock Return To Pre-Inflation Shock Highs? (Forbes)
Steel Tariffs And Jobs: You Have To Look At The Whole Supply Chain (Forbes)
U.S. Steel Bets on a New Technology—and the South—to Survive (Bloomberg)