(New York) U.S. steelmaker United States Steel has engaged in strategic soul-searching after receiving several unsolicited offers for a partial or full takeover, and has already rebuffed an “unreasonable” suitor, but others are rushing.
“The board of directors has decided to initiate a formal process […] to evaluate strategic alternatives for the company,” U.S. Steel (USS) reported a few days ago.
The reason ? The board “has received multiple unsolicited proposals ranging from acquiring certain production assets to considering the business as a whole,” group boss David Burritt said in a statement.
One of the suitors quickly rose to prominence: its competitor Cleveland-Cliffs, which explained in a press release making public its secretly transmitted offer on July 28 that it wanted a total union to form the only American steelmaker in the top 10. worldwide in production volume (31 million tonnes).
His $35-a-share bid puts his greed at around $10 billion, with a cash and stock-funded deal paying a 43% premium to U shareholders. S. Steel during August 11. Synergies would amount to approximately $500 million.
The advice of U. S. Steel agreed to talk, but ended up turning him down in the face of refusal, Mr. Burritt explained to Cliffs boss Lourenco Goncalves in a letter made public, from the suitor to give details of his activities and his own valuation. .
According to Mr. Burritt, Cliffs wanted USS to agree to its financial terms as a condition of any initiation of the due diligence process.
“To require our board to do this is in essence to ask that it breach its fiduciary rights,” Burritt said. Therefore, he “has no choice but to reject your unreasonable proposal.”
A decision all the easier to make certainly, as other companies have presented themselves as a white knight. Some officially.
This is the case of Esmark, a family conglomerate, which offered the same amount per share as Cleveland-Cliffs with a similar financing combining cash and securities, according to its press release.
He says he has forty years of experience in the steel industry with Esmark Steel Group, claiming fourth place in the sector in the United States.
Matthew Miller, analyst at CFRA Research, recalls that Esmark has already tried his luck in 2016 and 2021.
No public reaction from U. S. Steel to these advances, valid until November 30.
The ArcelorMittal group, world number two cited by the media as being also in the running, did not wish to comment to AFP.
While he seemed open to a marriage at first glance, U.S. Steel nevertheless cautioned that he had no deadline or timeline for his strategic introspection and that there was “no assurance” that it would lead to any transaction.
The USW steelworkers’ union has already indicated that Cleveland-Cliffs has its preference.
Its president Thomas Conway wrote a letter to this effect in early August, recalling that the collective agreement in force with USS gave him a right of opposition in the event of an offer to take over all or part of the company.
“The USW has a very strong relationship with Cliffs and will not exercise that right,” Conway said, saying he would not support anyone other than Cliffs.
“Retaining American management of the steel industry is critical to many fundamental American businesses,” he said.
“Given the importance of the steel to national security […], and given the approval of the transaction by the USW, we anticipate the transaction to proceed,” Miller noted. , pointing out that USS shareholders would no doubt find the 43% premium attractive enough to accept this union.
According to him, it will have a better chance of obtaining the approval of the American regulatory authorities than a foreign group like ArcelorMittal.
At worst, the latter could claw back business that a buyer might be forced to divest for competition reasons, Miller said.
Until a “clear path emerges” in this “highly fluid” situation, Standard and Poor’s on Friday placed USS’s “BB -” rating on review.
USS’s appeal stems, say observers, in particular from the fact that it will complete an expensive capital plan that includes the installation of electric arc furnaces (EAFs) instead of coal-fired blast furnaces. , to reduce its carbon footprint.
And President Joe Biden’s grand climate plan, which has been in effect for just a year, should eventually bring down the cost of American steel and therefore make it very competitive with European steel, said said an industry source.
