Sat | Dec 9, 2023

122-year-old US Steel reviewing buyout offers

Published:Wednesday | August 30, 2023 | 12:08 AM
United States Steel’s Edgar Thomson Plant in Braddock, Pennsylvania, is shown on February 26, 2019.
United States Steel’s Edgar Thomson Plant in Braddock, Pennsylvania, is shown on February 26, 2019.

After receiving two buyout offers in the past month, United States Steel Corporation said Tuesday that it is in the process of reviewing multiple offers for the storied company and symbol of American industrialisation.

US Steel rejected a US$7.3 billion buyout proposal from rival Cleveland-Cliffs two weeks ago, and that offer was followed by US$7.8 billion bid from the industrial conglomerate Esmark. Shares of the Pittsburgh steelmaker soared more than 30 per cent on speculation that a deal was imminent.

In a letter to shareholders Tuesday, US Steel said it had entered into confidentiality agreements with “numerous” third parties and was beginning to share due diligence information with potential buyers.

“Our number one obligation is to uphold our fiduciary duties,” the company wrote in the letter. “This means that we are focused on the path forward for our Company that drives the most value for you – our stockholders.”

Shares climbed another two per cent early Tuesday.

The proposal by Cleveland-Cliffs, 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, which dominates global steel production today. Cleveland-Cliffs CEO Lourenco Goncalves said a tie-up between the two US steelmakers would create “lower-cost, more innovative and stronger domestic supplier for our customers”.

Goncalves has said that he’s ready to continue talks with 122-year-old US Steel despite the rejection of its initial offer.

Soaring prices have helped fuel consolidation in the steel industry this decade. Steel prices more than quadrupled near the start of the pandemic to near US$2,000 per metric ton by the summer of 2021 as supply chains experienced gridlock, a symptom of surging demand for goods and the lack of anticipation of that demand.

Cleveland Cliffs acquired AK Steel in 2019 right before steel prices began to spike and within a year, it acquired ArcelorMittal USA in 2020 for US$1.4 billion. US Steel bought Big River Steel the following year.

Prices have settled back to around US$800 per metric ton, but that remains at the top end of the spectrum for steel prices over the past six years.

US Steel has been a symbol of industrialisation since it was founded in 1901 by J.P. Morgan, Andrew Carnegie and others, and the domestic steel industry dominated globally before Japan, then China, became the pre-eminent steelmakers over the past 40 years.