Shares of US Steel jumped about 27% in early trading on Monday, after the steelmaker rejected a $7.3 billion buyout offer from Cleveland-Cliffs but said it would review its options following “multiple unsolicited proposals” from other unnamed bidders.
Even though US Steel has so far rejected entreaties from Cleveland-Cliffs, shares surged on Monday, reflecting expectations that the Pittsburgh-based steel company could be acquired after several consecutive quarters of falling revenue and profit owing to high raw material and energy costs.
The US Steel stock traded at $28.80 in early Monday action, lower than the offer from Cleveland-Cliffs, the largest flat-rolled steel producer in North America, as investors doubt a deal may not happen at that price.
The company on Sunday offered to buy US Steel in a cash-and-stock deal valued at $35 per share, or a 43% premium to US Steel’s last closing price. Shares of Cleveland-Cliffs rose about 2% in early trading.
US Steel, however, said it has invited Cleveland-Cliffs to be a part of the review process.
“CLF appears like the only logical acquirer for 100% of US Steel,” said Citi analyst Alex Hacking, adding that the company is worth more to Cleveland-Cliffs than anyone else.
If the two firms were to combine, it would be the largest steel producer in North America, the 10th largest producer in the world, and a dominant supplier to the transportation sector, KeyBanc Capital Markets analyst Philip Gibbs said in a note.
“We view the probability of this deal getting done without meaningful concessions as low,” Gibbs added. Despite concerns around antitrust regulations, analysts at B Riley believe that Cleveland-Cliffs is “well positioned” to offer the most compelling economics.
Published in The Express Tribune, August 15th, 2023.
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