Cleveland-Cliffs reveals $35/share offer to acquire U.S. Steel; Bid rejected despite 43% premium

Cleveland-Cliffs Inc. (NYSE: CLF) has publicized its previously undisclosed bid to acquire U.S. Steel Corporation (NYSE: X) at a considerable premium of 43% to its current share price. The proposal, dated July 28, 2023, offered $17.50 cash plus 1.023 shares of Cliffs stock for each U.S. Steel share. This amalgamated to a total of $35.00 per U.S. Steel share. Despite the enticing terms, the U.S. Steel Board dubbed the proposal as “unreasonable,” declining the offer on August 13, 2023.

North America’s preeminent flat-rolled steel producer, Cleveland-Cliffs, holds an expansive portfolio from mining raw materials to producing steel for diverse markets, including a dominating presence in the automotive sector. The Cleveland, Ohio-based company employs about 27,000 individuals across the U.S. and Canada.

In light of the proposal, Lourenco Goncalves, CEO of Cleveland-Cliffs, stated, “The value and competitiveness stemming from merging our two iconic American companies are unparalleled.”

Goncalves accentuated the merger’s prospective benefits like complementing U.S.-based operations, emissions reduction focus, and anticipated synergy from prior acquisitions.

Moreover, he emphasized the unanimous support from the United Steelworkers union, indicative of the company’s commitment to its massive workforce and the communities they serve. This partnership would elevate Cleveland-Cliffs among the top 10 global steel companies, the only American entity in this elite group.

The United Steelworkers’ collective bargaining agreement empowers them to counter such proposals. Yet, they’ve expressed full support for the Cliffs’ proposition, affirming no endorsement for any other party for a similar transaction.

Cleveland-Cliffs remains prepared for immediate discussions towards a definitive agreement. The offer has received Cliffs’ Board of Directors’ unanimous approval and is backed by multiple prominent banks expressing high confidence in arranging necessary debt financing. The company, based on counsel reviews, is optimistic about a swift regulatory approval.

Guiding Cleveland-Cliffs through the offer are financial advisors Moelis & Company LLC, Wells Fargo, J.P. Morgan, UBS, with legal counsel from Davis Polk & Wardwell LLP.