Another rival steel producer, Esmark, has entered the bidding war to takeover US Steel. Esmark announced a cash offer of $35 per share on Monday, with the offer period running from August 14, 2023, to November 30, 2023. The CEO of Esmark, James Bouchard, who is a former US Steel executive, expressed excitement about the potential acquisition, stating that Esmark is well-positioned to operate and continue to grow. This announcement came shortly after news broke that Cleveland-Cliffs was in talks to purchase US Steel.
Shares of US Steel saw a significant surge in early trading on Monday, and the stock jumped even higher following Esmark’s offer, increasing nearly 40%. However, US Steel has rejected Esmark’s proposal, while Cleveland-Cliffs, already the nation’s second-largest steelmaker behind Nucor, stated that it will continue to pursue the deal. Cleveland-Cliffs proposed to pay $17.50 in cash and 1.023 shares of Cliffs stock for each US Steel share, which would amount to a 43% increase from US Steel’s closing price on Friday.
US Steel disclosed that it has received multiple unsolicited proposals and has started a strategic review of its options. Private talks between US Steel and Cleveland-Cliffs fell through due to Cleveland-Cliffs’ refusal to sign a nondisclosure agreement (NDA) that would allow the exchange of financial information. The two companies disagreed on the terms of the deal, with US Steel insisting on evaluating the value of the stock that Cleveland-Cliffs proposed to use before agreeing to the terms.
Despite the rejection, Cleveland-Cliffs remains optimistic about the potential acquisition and expressed interest in continuing engagement with US Steel. The United Steelworkers union, representing workers from both companies, endorsed the proposed deal in a letter and stated that it would not exercise its right to make a counteroffer for an employee buyout if Cleveland-Cliffs purchases the company.
US Steel’s rejection and the presence of regulatory and antitrust clearances as conditions in Esmark’s offer indicate uncertainty surrounding the successful completion of any deal. Cleveland-Cliffs and US Steel are the main US steelmakers that produce most of their steel from raw materials, while Nucor primarily uses steel scrap to produce steel. US Steel produced 11.2 million tons at its US operations and 3.7 million tons in Europe in 2022, while Cleveland-Cliffs produced 16.8 million tons and Nucor produced 21 million tons, according to industry rankings and company reports.