U.S. Steel (X) -) shares extended gains Monday, rising to the highest levels in more than a year, after privately owned Esmark Inc. trumped rival Cleveland-Cliffs (CLF) -) with a $7.85 billion bid for the iconic steelmaker.
Esmark said it would pay $35 a share cash for U.S. Steel, a 54% premium to the group's Friday closing price and around 8% higher than the cash-and-shares offer proposed by Cleveland-Cliffs over the weekend.
Cleveland-Cliffs said it was prepared to pay $32.53 for each share of U.S. Steel, consisting of $17.50 cash plus 1.023 shares of Cleveland-Cliffs. That would be a 43% premium to U.S. Steel's Friday closing price and a level that would value the country's second-biggest steelmaker at around $7.26 billion.
Esmark said its proposal would run until at least Nov. 30 and could be extended.
“With more than 40 years of steel industry experience, and as a former executive and statutory representative of U.S. Steel, I have significant intimacy with the steel business in the U.S. and around the globe,” said Esmark Chief Executive James Bouchard, who is also the company's founder and controlling shareholder.
“This is an exciting time as the entire American steel industry is restructuring, and with Esmark’s longstanding history of excellence, we are anxious to continue to grow and we’re well positioned to come in and operate,” he added.
U.S. Steel shares were marked 39.2% higher in late-afternoon trading Monday to change hands at $31.62 each, the highest since March of last year and a move that would value the group at around $7.2 billion.
U.S. Steel: Cleveland-Cliffs Bid 'Unreasonable'
U.S. Steel rejected the $7.3 billion offer from Cleveland-Cliffs late Sunday, calling the unsolicited deal an "unreasonable proposal."
The Pittsburgh company said Cleveland-Cliffs, which went public with its takeover bid earlier that day, would not agree to sign a nondisclosure agreement that would enable the two companies to evaluate the cash-and-shares proposal.
The group did, however, invite Cleveland-Cliffs to "reach out to our financial and legal representatives" and join the group's recently unveiled strategic review.
Last month U.S. Steel posted solid second-quarter earnings, with profit pegged at $1.92 a share, topping earlier forecasts, even as sales slumped 20% to $5.01 billion.
The group needs to maintain cash-flow growth, however, if it is to meet the spending commitments its made to expand projects in Arkansas following its 2020 acquisition of Big River Steel.
Over the weekend, U.S. Steel Chief Executive David Burritt said the group had received "multiple unsolicited proposals" that ranged from a whole purchase to offers for parts of the business.
"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," he added.
"While the Board conducts its review of previously received proposals and other proposals it expects to receive, our entire team remains focused on safely and responsibly executing across all of our operations and advancing our Best for All strategy, while continuing to deliver for all stakeholders.”
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