YEREVAN (CoinChapter.com) — US Steel Corporation (NYSE: X) stock rallied more than 35% to $31.08 per share this Aug 14.
The stock rally appeared a day after the news of US Steel rejecting a takeover bid from Ohio-based Cleveland-Cliffs (NYSE: CLF). Notably, Cleveland-Cliffs had offered to acquire US Steel at around $7.3 billion, representing about 45% premium prices than the stock’s Aug 11’s closing valuation.
Founded in 1901, US Steel has dominated the industry for decades as a top steel supplier to automobile makers, appliance sector, and construction companies. The company has recently attracted multiple offers about tucking its mills and iron ore mines into other top steel businesses.
However, US Steel views Cleveland-Cliffs’ acquisition offer as “unreasonable,” with CEO David Burritt asserting that they have received better offers from other steel companies in the sector.
Cleveland-Cliffs’ CEO Confident on US Steel Deal
Lourenco Goncalves, the CEO of Cleveland-Cliffs, said their offer to US Steel would succeed because the deal has backing from a key union.
“They called my offer unreasonable, but the market is basically saying loud and clear that the offer is reasonable,” Goncalves told Bloomberg TV on Aug 14, adding:
“We’re going to get to the right spot no matter what.”
The CEO referred to the United Steelworkers Union, which has a collective bargaining agreement with US Steel. In other words, the union can intervene in the deals offered to US Steel. And its endorsement of Cleveland-Cliffs has raised its potential to acquire US Steel.
CLF’s stock price jumped over 8% on Aug 14 on the news.
Esmark Rivals Cliffs’ Bid, However
As the suspense over the US Steel deal grows, Esmark, a Pennsylvania-based industrial conglomerate with huge exposure to the steel industry, has offered to acquire US Steel’s all issued and outstanding shares for $7.8 billion — more than Cleveland-Cliffs’ bid.
“This is an iconic business that built the United States,” James Bouchard, the CEO of Esmark and a former vice president of US Steel, told the WSJ, adding:
“It should be in American hands.”
Demand for steel has slowed down in recent years, with shipments from US mills declining 5.5% in 2021, according to the American Iron and Steel Institute, a trade group. Nonetheless, steelmakers continue to pour money into new and expanded plants, aiming to produce an additional 12 million tonnes per year of flat-rolled steel.
The expansion comes as the US plans to boost infrastructure spending on roads and bridges. That, in turn, could boost demand for steel, suggesting why US Steel has become a hot property in the sector.
