United States Steel Corp. surged after it rejected a takeover offer from rival Cleveland-Cliffs Inc. to create one of the world’s biggest steelmakers, and said it will begin a review of its strategic options instead.
US Steel, an icon of American industry with roots stretching back over a century, on Sunday announced a formal process to assess its alternatives after receiving approaches for parts or all of the business. About three hours later, Cliffs went public with its cash-and-share bid, which values the company at about $7.25 billion based on closing prices on Friday, a 43% premium. US Steel surged as much as 27% Monday in New York. Cliffs traded as much as 2% higher.
Cliffs said it submitted the proposal privately on July 28 and received a rejection letter on Sunday, calling the offer “unreasonable.” US Steel later confirmed the response, but defended its decision saying that Cliffs had refused to sign a non-disclosure agreement unless the Pittsburgh-based producer agreed to the economic terms of the proposal in advance.
The back-and-forth jousting was part of a whirlwind Sunday in which two of the biggest American steelmakers thrust the future makeup of the industry into question, just a week from the start of the biggest steel conference in North America.
A deal with US Steel would catapult Cliffs into the ranks of the top producers globally, a list dominated by China. The combined company would hold a powerful position as the primary supplier to the US auto industry, as well as ownership of 100% of domestic iron ore reserves. It’s an issue US Steel addressed in its letter to Cliffs, saying it had discussed with Cliffs’ counsel questions that both sides would need to better understand to assess antitrust risk in the proposal.
Cliffs, which was traditionally an iron ore miner rather than a steelmaker, has been the most active dealmaker in the US industry in recent years — first snapping up AK Steel Holding Corp., and then buying the US business of European steel giant ArcelorMittal. The purchases made Cliffs a key operator of traditional blast furnaces in the US, and gave it a massive foothold in the highly profitable business of steelmaking for the car industry.
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