U.S. Steel Corp. is up for sale, its directors say, adding that the Pittsburgh-based manufacturer received multiple bids for parts or all of the company, including from Cleveland-Cliffs Inc., one of its largest rivals.
In a statement Sunday, Aug. 13, the U.S. Steel board said it has hired investment bankers and attorneys to help them look over those offers as well as others expected to follow now that the company, which is on track to ring up $20 billion in sales this year, is formally on the market, or "exploring strategic alternatives" in corporate speak. Shortly after U.S. Steel’s statement, the leaders of Cleveland-Cliffs went public with their cash-and-stock offer, which they said they first submitted July 28 but which was rejected Aug. 13 as “unreasonable.”
“U.S. Steel has been on a strategic journey executing a compelling transformation,” President, CEO and Director Dave Burritt said in the company’s statement. “The interest demonstrated by the unsolicited proposals received to date is a validation of U. S. Steel’s strategy and successful track record of execution.”
Burritt and his executive team recently reported second-quarter profits of $477 million, less than half those from the same period of 2022, on sales of $5.0 billion versus $6.3 billion. Year-over-year price drops of about 20% for both its flat-rolled and mini-mill products accounted for much of the profits drop and Burritt at the time called out “healthy sequential growth” in the mini-mill segment. (You can read much more on U.S. Steel’s mini-mills investment in our recent conversation with Chief Strategy and Sustainability Officer Richard Fruehauf.)
“Our strategic process is accelerating with favorable external megatrends and setting up a period of tremendous opportunity for U.S. Steel and for our stockholders,” Burritt said on a conference call after reporting those Q2 numbers. “Broadly speaking, those external factors are decarbonization, deglobalization and digitization.”
But while U.S. Steel may be in the right place to capitalize on those trends, investors haven’t been rewarded of late: Shares of U.S. Steel (Ticker: X) have given up 20% of their value over the past six months, trimming the company’s market capitalization to about $5.1 billion. By comparison, Cleveland-Cliffs (Ticker: CLF) has fallen 27% since mid-February and those of Steel Dynamics Corp. (Ticker: STLD) are down about 17%. Nucor Corp. shares (Ticker: NUE), however, have held their ground since early this year.
Cleveland-Cliffs Chairman, President and CEO Lourenco Goncalves said in a statement of his own that he is open to continuing a conversation with U.S. Steel leaders despite their rejection of his bid, which includes plans for Cleveland-Cliffs to return more capital to shareholders and relaunch the dividend it suspended during the early days of the COVID-19 pandemic.
“The numerous benefits we are excited about include the combination of our complementary U.S.-based footprint, our ability to leverage our in-house metallics capabilities, and enhancing our shared focus on emissions reduction,” Goncalves said. “With these benefits, combined with our experience of extracting meaningful synergies from previous acquisitions, we expect to create a lower-cost, more innovative, and stronger domestic supplier for our customers across all segments.”