What happened
Shares of United States Steel (X 0.45%) are up 36.7% this week as of 1:45 p.m. ET Friday, according to data provided by S&P Global Market Intelligence, after the steel producer announced a strategic alternatives process after receiving multiple unsolicited acquisition proposals.
So what
To be sure, on Sunday U.S. Steel announced a strategic alternatives process -- a phrase most often coinciding with a company's decision to explore a sale -- stating it had received "multiple unsolicited proposals that ranged from the acquisition of certain production assets to consideration for the whole company."
A few hours later, fellow steel producer Cleveland-Cliffs (CLF -1.18%) announced publicly that it had made an offer to acquire all outstanding shares of U.S. Steel for $17.50 in cash and 1.023 shares of Cliffs stock. Based on Cliffs' closing price Friday, that would have implied a value for U.S. Steel of $35 per share, or roughly $7.3 billion -- a 42% premium to U.S. Steel's closing price on July 28, 2023. It also noted that U.S. Steel's Board of Directors had already rejected the offer as "unreasonable" via a letter received earlier on Aug. 13.
Later that evening, U.S. Steel issued a second press release stating that it had "invited" Cleveland-Cliffs to participate in that review process after receiving the cash-and-stock proposal. At the same time, U.S. Steel elaborated that while its advisors indicated they were willing to enter into a nondisclosure agreement (NDA) with Cleveland-Cliffs on Aug. 7, 2023, to discuss "several key issues" in the proposal -- including valuation of the stock component, regulatory risk and timing, and prospects for the combined company -- they were "shocked" to receive a letter from Cleveland-Cliffs on Aug. 11 "refus[ing] to sign the nearly completed NDA unless [U.S. Steel agreed] to the economic terms of [the] proposal in advance."
Further complicating matters, on Monday privately held Esmark -- controlled by billionaire investor James Bouchard -- issued his own higher $7.85 billion bid for U.S. Steel. On Wednesday, Reuters also reported interest from Luxembourg-based ArcelorMittal (MT -0.39%) in potentially coming to the table with its own offer.
Now what
On Thursday, Cleveland-Cliffs announced it had received the exclusive right to bid on U.S. Steel from the United Steelworkers Union (USW) -- with the USW effectively transferring its contractual right to counterbid for U.S. Steel's assets -- making Cliffs the "only realistic buyer able to acquire the totality of U.S. Steel." Cliffs also agreed to assume all of the agreements between U.S. Steel and the USW upon closing of the transaction, and implied the USW maintained the right to block rival bids for the company.
On Friday, however, U.S. Steel retorted that while the USW had indeed supported the Cleveland-Cliffs bid, that also meant it gave up its right to block rival bids. As such, U.S. Steel intends to push forward with its strategic review and entertain those rival bids in order to maximize shareholder value.
In any case, it's clear this saga is far from over, and the future of one of the country's oldest steelmakers hangs in the balance.
