United States Steel has launched a strategic review after receiving several unsolicited offers for a partial or total takeover, and has already rebuffed one "unreasonable" offer.
But others potential suitors are pressing ahead.
"The board of directors has decided to initiate a formal review process," in order to "evaluate strategic alternatives for the company," U.S. Steel announced in a recent statement.
The reason? The board had received "multiple unsolicited proposals that ranged from the acquisition of certain production assets to consideration for the whole company," chief executive David Burritt said in the statement.
One suitor swiftly revealed itself to be U.S. Steel's main competitor, Cleveland-Cliffs.
In a press release, the company said it was seeking a total union to form the only American steelmaker in the world's Top 10 in terms of production volume.
Its offer of $35 per share valued this merger at around $10 billion, with a cash-and-stock-financed transaction granting a 43 percent premium to U.S. Steel shareholders at August 11 prices. Synergies would amount to around $500 million.
U.S. Steel's board agreed to discuss the matter, but eventually turned the company down, Burritt explained to Cliffs' chief executive Lourenco Goncalves in a letter the company later made public.
- White knights -
According to Burritt, Cliffs wanted U.S. Steel to agree to its financial terms as a prerequisite to engaging in the due diligence process.
"Pushing our board to do so is in essence a demand that it breach its fiduciary duties," Burritt said in his letter, adding he was left with no option but to reject the "unreasonable proposal."
The decision was maybe made easier by the fact that other companies have since come forward as white knights -- some of them publicly.
The family-owned conglomerate Esmark was one of them.
Esmark has offered the same amount per share as Cleveland-Cliffs, with a similar financing combination of cash and securities, it announced in a statement.
The firm said it has 40 years' experience in the steel industry as Esmark Steel Group, and claims to be the fourth-largest steelmaker in the United States.
CFRA Research analyst Matthew Miller told AFP that Esmark already tried its luck in 2016 and 2021, but was rebuffed both times.
U.S. Steel has not commented on these advances, which are valid until November 30.
ArcelorMittal, the world's second-largest steelmaker, was also reported to be in the running, but declined to comment for the article.
U.S. Steel has said it's open to an offer, but stressed it had "no deadline" to finish its strategic review, and that there was "no assurance" it would accept one.
Meanwhile, the steelworkers' union USW has indicated it would prefer the deal put forward by Cleveland-Cliffs.
- National security -
In a letter shared with Cliffs in early August, USW President Thomas Conway pointed out that the collective agreement in force with U.S. Steel gave him the right to object in the event of a takeover offer for all or part of the company.
"USW has a very strong relationship with Cliffs and will not exercise this right," Conway said, asserting that he would not support anyone other than Cliffs.
He added that "maintaining American leadership in the steel industry is critical to many vital parts of the US economy."
"Given the importance of steel to national security," and USW's effective veto on any other deal, "we expect the deal to achieve regulatory approval," CFRA's Miller said.
He pointed out that U.S. Steel's shareholders would no doubt find the 43 percent premium sufficiently attractive to accept the deal.
Cliffs would have a much better chance of obtaining the approval of American regulatory authorities than a foreign group like Luxembourg-based ArcelorMittal, he added.
Amid the tussle over the future of U.S. Steel, the ratings agency S&P placed its "BB-" rating under review -- at least until a "clear path emerges" in this "highly fluid" situation.
U.S. Steel's appeal, according to analysts and industry insiders, stems from the fact it is about to complete a costly investment plan, including the installation of electric arc furnaces instead of coal-fired blast furnaces, to reduce its carbon footprint.
And President Joe Biden's major climate plan, in force for just over a year, should eventually lower the cost of American steel, making it highly competitive with European steel, according to an industry source.
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